[ad_1]
Asia-Pacific’s growth prospects are favourable despite war and higher prices, inflation and interest rates, according to New York City-based S&P Global, which recently said the exception is China, which is expected to fall short of its growth targets because of weaknesses induced by the COVID-19 lockdown. It expects India’s gross domestic product (GDP) to grow by 7.3 per cent in fiscal 2022-23 compared with 7.8 per cent three months ago.
The causes of this downward pressure on growth in India are high oil prices, slowing global demand for India’s exports and high inflation.
Asia-Pacific’s growth prospects are favourable despite war and higher prices, inflation and interest rates, according to S&P Global, which said the exception is China, expected to fall short of its growth targets due to lockdown-related weaknesses. It expects India’s GDP to grow by 7.3 per cent in fiscal 2022-23 compared with 7.8 per cent three months ago.
Factors supporting growth in India include a normal monsoon forecast for 2022. This will support agriculture production and help control food inflation. A rebound in contact-based services—as vaccination penetration improves and people learn to live with the virus—will also boost growth.
It has further lowered its baseline 2022 growth forecast for China to 3.3 per cent.
Global obstacles have altered the outlook since S&P Global’s Credit Conditions Committee convened three months ago. These include a longer-than-expected Russia-Ukraine conflict; higher energy and commodity prices; higher and more sticky inflation, especially in the United States; faster monetary policy normalisation in the United States and Europe.
For Asia-Pacific, the two key changes to the global outlook are the weaker growth in China due to stringent COVID restrictions and the higher projected US interest rates.
Outside China, the post-COVID domestic recovery is mostly continuing. The financial information and analytics company expects solid economic growth in 2022-23, especially in economies relatively led by domestic demand like India, Indonesia and the Philippines.
However, rising inflation has been a key factor behind the start of the monetary policy normalisation in many economies: all but four central banks have started raising their policy rates. The other key motivation is staving off external pressure amid rising global interest rates.
Capital outflows and currency depreciation against the US dollar have so far been contained. But we expect most central banks to continue to raise their policy rates to anchor inflation expectations and guard against external vulnerability.
In China, lockdowns in Shanghai and elsewhere have hindered the economy since end-March. Consumption and the service sector have particularly suffered, and more so than investment and industrial production. Nonetheless, because of the intricate supply chains in and around Shanghai industrial production has been substantially disrupted.
The key downside risk in China is new COVID lockdowns in one or more large, relatively developed cities with economic heft and connectivity. Gross domestic product growth in 2022 would be lower still, with the relative strain on consumption, investment, industrial production and service sector activity to resemble that of the recent episode.
China’s lockdown weakness has lowered demand for other countries’ exports. The fact that consumer spending is hit harder by the lockdowns than investment and industrial production mitigates the stress on other economies, as China’s consumption is less import-reliant.
Nonetheless, China’s imports have weakened severely, in part because of the impact of the property downturn on commodity imports, S&P Global added.
Fibre2Fashion News Desk (DS)
[ad_2]
Source link
