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S&P Global has cut forecasts for growth in Asia’s emerging economies, including India, the Philippines, Thailand, and Malaysia. The worldwide known firm for analytics and forecasting lowered projections for Asian emerging markets (EMs) which continue to struggle with gaining control over the coronavirus crisis.
As per the latest data given in the report, India’s GDP growth forecast has been chopped to 9.5% from 11%, the Philippines to 6% from 7.9%. Meanwhile, Thailand’s GDP growth forecast for 2021 was revised to 2.8%, down from an earlier forecast of 4.2%, and Malaysia to 4.1% from 6.2%.
The rating agency cited the slow rollout of vaccines as the top risk for Asian emerging markets in the context of the current outbreak and warned of the risk from further waves of the pandemic. According to S&P Global Ratings, the pandemic would only subside once vaccinations ‘reach a level consistent with herd immunity.’
In emerging economies, vaccines are currently being administered at a rate of 0.2 doses per 100 people per day. At this rate, the rating agency estimated it would take another 23 months for 70% of the population to be fully vaccinated. S&P’s expectation is that reaching key vaccination threshold – especially the 70% level identified by the World Health Organisation – will determine how quickly consumption rebounds.
“The top risk facing Asian emerging markets is a slower-than-expected rollout of the vaccines,” S&P Global Ratings Chief Economist Paul Gruenwald said in a new report. The second risk to EMs is an uneven recovery from the current pandemic, according to the analyst. This is as most countries are facing inflation and low growth stats, due to the Covid-19 circumstances.
Another big risk facing emerging economies, it said, was if strong US growth and inflation cause an earlier than planned tightening of monetary policy by the Federal Reserve. While EM policymakers can’t control US inflation dynamics and the policy response, they can implement measures to influence domestic growth,” it added.
Meanwhile, upgrades were awarded to growth projections of China, South Africa, and much of Latin America. China’s forecast was nudged up to 8.3% from 8%. GDP forecast for Taiwan was up to 5.6% from 4.2%, and Hong Kong’s GDP forecast for the calendar year was up 2.3 percentage points to 6.5%. Meanwhile, the rating firm reduced projections for Japan to 2.5% as private consumption remained soft.
Asia Pacific recovery “mostly on track”
Some of the upward revisions in the Asia Pacific region were attributed to growing exports. “External demand is robust and this has helped lift manufacturing investment,” S&P said.
While the economic recovery in emerging markets in EMEA is progressing at a faster pace than the rating agency expected, the Asia Pacific region’s recovery is mostly on track. It forecasted regional growth to total 7.1% this year. This was slightly lower than its earlier 7.3% projection in March.
“The constraint remains domestic demand, especially private consumption,” said Shaun Roache, Asia Pacific chief economist at S&P Global Ratings. As per S&P Global, economic recovery is advancing in developed economies but lags in emerging economies.
Private consumption is exerting a drag and an improvement is expected in the next few quarters. China, South Korea, and Singapore could see improvement come in by the third quarter. As per the rating agency, Australia and Japan are likely to follow early by 2022, while the Asian emerging markets will lag.
