Asia-Pacific economies can expect solid growth: Rates to rise

SINGAPORE - The overall Asia-Pacific economy is on track for steady growth over the next two years, but the benefits to the region of a recovery in the U.S. may be muted. According to ratings agency Standard & Poor's.

S&P anticipates that GDP for the region will expand by 5.3% this year and by 5.4% in 2015 and 2016. Growth in emerging Asia will be about one percentage point faster.

"We have nudged up our forecast for China to 7.4% this year, and believe it will continue to lead Asia-Pacific growth. Our revision reflects stronger-than-expected performance in the second quarter, as well as the Central government's policy actions and statements suggesting that this year's growth targets are more likely to be met," said SP chief economist for Asia-Pacific, Paul Gruenwald.

"We have also marked down Japan's growth this year due to much weaker-than-expected second quarter following implementation of a consumption tax hike on April 1."

The report says that signs of recovery in the U.S. should be a welcome development for the region's economic prospects, but the outlook is not unambiguously positive.

"While our risk profile has not changed materially since our last quarterly report, we would note that China began a property slowdown around mid-year.
How this plays out, including the response of the authorities, is top of our 'what to watch' list," said Gruenwald.

“We are also watching the region position itself for rising interest rates starting next year, which could crimp growth expectations and credit quality should the increases happen faster than expected.

“Downside risks to Japan's growth have re-emerged, too, following a sharp drop in activity in the wake of the consumption tax hike. And geopolitical risks have reared their head again.” www.standardandpoors.com (ATI).