Despite hit by inflation, China will lead Asia-Pacific countries in economic growth in 2008, followed by India, said Standard & Poor’s Ratings Services.
Although Japan is still the largest economy in the region, China’s growth could position the country as the biggest economy in Asia-Pacific and the second-largest globally within the next five years. In a report published on Monday and titled “The Best And The Rest: The 2008 Asia-Pacific Sovereign League,” Standard & Poor’s highlights the key quantitative features and trends of our statistical forecasts for 2008 for the 22 rated sovereigns in the Asia-Pacific region.
Inflation across the region is likely to remain high by recent standards. Driven by a demand-side oil shock, escalating food prices, and China’s unwavering appetite for commodities, even countries such as Singapore–with historical inflation rates of about 1%–are expected to tip the 5% mark for the first time. Topping the league is once again Sri Lanka, which has the dubious honour of having the highest inflation among Asia-Pacific sovereigns for three years running.
“We expect regional growth dynamics to be less robust in 2008, with an unweighted average growth rate among rated sovereigns of about 5.0%, compared with 5.8% in 2007 and a record 6.6% in 2004,” said Standard & Poor’s credit analyst Yee Farn Phua. “A slowdown in the US economy and tight global credit conditions will hit the Asia-Pacific region but these concerns are partly mitigated by the expected stronger domestic demand and intraregional trade that should substantially counter the weaker US import demand.”
“On the fiscal front, Singapore tops the regional ranking with a fiscal surplus of 7.5% of GDP expected for 2008. Oil and gas exporter Kazakhstan is another notable performer in Asia Pacific,” noted Mr Phua.
“On the other end of the spectrum, Sri Lanka overtook Japan as the biggest net debtor in the region in 2007. Sri Lanka and Japan feature among the most indebted governments globally.”