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S&P: India overtakes China as Asia-Pacific growth leader

Both the (real) net export contribution to growth and productivity growth have stalled since the global financial crisis, the report said.

India has overtaken China as the Asia-Pacific region’s growth leader, at least for now, global rating firm Standard & Poor’s has said.

However, the region’s new growth driver will now be consumption by the rising middle class and the leader of this drive will be China as the region’s largest economy rebalances to a less investment heavy model, it said in a report.

At the other end of the spectrum, the more trade-dependent “Tiger” economies (Hong Kong, Singapore, South Korea, and Taiwan) will continue to struggle. GDP growth in this group will reach just 2 per cent with only a modest recovery in the next two years, with growth remaining below 3 per cent, it said.

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S&P said growth in Asia-Pacific in 2016 and 2017 is likely to be sluggish but still better than that in the rest of the global economy. However, the drivers for growth in the region are changing, it said in a report titled, “Can Asia-Pacific Capitalize On Its New Growth Drivers?”

Exports and productivity, which have traditionally driven Asia-Pacific economies, have entered a new and much slower growth phase. Both the (real) net export contribution to growth and productivity growth have stalled since the global financial crisis, it said. “Asia-Pacific will need to adapt to changes in the growth drivers to ensure continued relatively strong, balanced, and sustainable growth,” said Paul Gruenwald, Standard & Poor’s Asia-Pacific chief economist. “We believe economies that can respond flexibly to market signals; move resources, including people, from the old growth sectors to the new ones, and provide credit and other financial support along the way, will do well.”

Standard & Poor’s forecast a relatively sluggish growth for the Asia-Pacific region. “Moreover, we see a steadily narrowing gap between the developed markets and the emerging markets as the latter have tended to slow more quickly,” the firm said.

“We are now projecting 5.3 per cent growth in the region for 2016 and 5.2 per cent for 2017, down fractionally from our previous report,” said Gruenwald.

First published on: 26-11-2015 at 12:54:53 am
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