India and SE Asian economies to expand at 5.4% over 2023-2026: S&P Global
World economy will expand at 3.2 percent, according to the agency
In Asia, entities rated by the agency have seen a doubling of default rate to 1.3 percent because of tighter financing conditions.
The combined economies of India and Southeast Asia will expand at an annual clip of 5.4 percent over 2023-2026, compared with 3.2 percent for the world, according to S&P Global Ratings.
“Together, these countries had $6.4 trillion in nominal GDP at the end of 2002–if this were one country, it would be the world’s third-largest economy,” read the rating agency’s statement.
The panelists, in a virtual conference organised by the agency, debated if outperformance of Asia’s emerging markets (EMs) can endure in the face of elevated external stresses including inflation and global rate hikes.
Also read: JP Morgan’s Sanjay Mookim on what will drive India’s long-term consumption boom
“Spillover risks could surface,” said Asia-Pacific head of credit research Eunice Tan. “Beyond being caught in the crosswinds of a desynchronised global economy, Asia EMs are also exposed to geopolitical tensions, climate pressures, and technology disruption.”
Despite these, the analysts of the rating agency believe that India’s and Southeast Asia’s economies will grow at a faster clip than the world.
The drivers of this will be diverse, they noted, including “solid domestic demand in India” and widening trade bases in countries such as Vietnam. Domestic funding capability has strengthened in some cases, providing alternatives to elevated costs for U.S.-dollar funding, the panelists added.
That said risks remain “elevated” with global debt at a record high.
“Global debt as of March 2023 is a record $305 trillion, or nearly a fifth higher than in 2007, before the global financial crisis,” the agency’s statement read. The analysts estimate that the interest expenses alone have risen by $4.8 trillion since the U.S. Federal Reserve and European Central Bank began raising policy rates to combat inflation.
“It is obvious that with inflation, higher interest rates and geopolitical tensions, the operating environment is now less stable,” said Terence Chan, a senior research fellow at S&P Global Ratings.
In Asia, entities rated by the agency have seen a doubling of default rate to 1.3 percent because of tighter financing conditions and China’s property downturn. The 18 defaulted issuers were predominantly in low speculative-grade ratings.
The rating agency’s economists believe that if recovery in China drags, the government could undertake a “major stimulus to accelerate matters”. Their estimate that the country’s economy will expand by 5.2% this year and 4.7% in 2024.
Over the medium-term, ongoing technology and trade tensions could lower China’s scope for productivity gains, a major growth driver, they noted. That said, they believe that the country’s growth will continue to outpace the western world in the coming decades.
“We are not in the ‘Peak China’ camp,” said Kuijs. “Given the combination of its large size and solid growth, China’s economy will continue to be a major driver of global growth.”
#modernbusinessnetwork #modernusinessindia #modernbusinessgermany #modernbusinessasia #modernbusinesstimes #modernbusinessgulf #modernbusinessworld #modernbusinesseurope #modernbusinessamerica
