DEBT watcher Standard & Poor’s Ratings Services lowered its economic growth expectations this year for Asia Pacific, including the Philippines, but still sees the country besting other Southeast Asian economies amid the slowdown in the region.
In a report titled “Asia-Pacific Could Be Entering A Steady State Of Slower Growth,” S&P said weaker global trade and a Chinese economy weighed down by the property sector suggest subdued growth ahead for economies in the region.
Overall gross domestic product (GDP) in Asia Pacific may expand by only 5.5 percent in 2015, instead of 5.6 percent as previously expected, due largely to a lack of export response to the incipient recovery in the US, the absence of a rebound in spending from the drop in global oil prices, and the ongoing correction in the Chinese property market, the credit rating agency said.
S&P forecasts Philippine GDP to grow by a slower 6 percent this year, instead of 6.2 percent as previously projected.
“While Asia Pacific remains the highest growth region globally, the outlook continues to be subdued. The effects of the two largest economies in the world are, each in their own way, weighing down activity,” it added, referring to the US and China.
No rebound in exports
S&P explained that the recovery in US durable goods consumption has not generated the expected bounce in Asia-Pacific exports.
Exports have actually fallen, although shipment to the US is doing better than to other destinations, it said.
“Those affected include South Korea and Taiwan, tiger economies that are usually early beneficiaries from a rise in global trade owing to their export product mix and their position in the supply chains,” it added.
In China, property market adjustments are weighing down regional growth through both direct and indirect channels.
“Our research has shown that the Chinese investment-led slowdown hits GDP growth in Hong Kong, Taiwan, South Korea, Singapore, and Australia, the hardest,” it said.
Indirectly, uncertainty concerning the depth and duration of China’s slowing growth is sapping confidence and investment in the rest of the region. The recent steep drop in Chinese equity prices underscores this trend, it added.
China’s stock market has been on a roller-coaster ride, sometimes opening with a jump of as much as 7 percent, before ending the day down by also that much, CNN reported separately.
On Thursday, stock trading in Shanghai showed some gains but in wildly volatile trade, and only after Beijing announced new measures to staunch a mainland rout that has fueled fears about the wider economy, according to an Agence France-Presse report.
Sub-par growth in Asean-4
S&P said the four biggest economies in the Association of Southeast Asian Nations or the Asean-4 are seeing sub-par growth. These are Indonesia, Malaysia, the Philippines and Thailand.
“Even the Philippines, one of the star performers, has hit a soft patch,” it said.
S&P forecasts Philippine gross domestic product (GDP) to grow 6 percent in 2015 from a previous projection of 6.2 percent.
The outlook for the Philippines in 2015 falls below the country’s expansion of 6.1 percent in 2014 as well as from the government’s growth assumption 7 percent to 8 percent.
Despite this, S&P said its 2015 growth forecast for the Philippines is higher than its growth projection for Indonesia (5.4 percent), Malaysia (4.6 percent), and Thailand (3.4 percent).
Overall, the Asean-4 group should continue to grow at 5 percent, outperforming the tiger economies—led by South Korea, and including Hong Kong, Singapore, and Taiwan–by about 2 percentage points, it added.