S&P maintains growth forecast for Thailand
As it cut economic growth forecasts of several countries in Asia Pacific including China and India, Standard & Poor's Ratings Services has maintained forecasts for other countries including Thailand.
The rating agency did not provide the forecast figure for Thailand, though. Consensus expectations for the country are now 5.3 per cent and 4.4 per cent for 2012 and 2013, respectively.
In a statement released today, S&P backed its action with three reasons - slowdown in China, ongoing troubles in the Eurozone, and a weaker recovery in the US.
“We have lowered our base case forecasts of 2012 real GDP growth by about half a percentage point for China to 7.5 per cent; Japan to 2.0 per cent; Korea to 2.5 per cent; Singapore to 2.1 per cent; and Taiwan to 1.9 per cent,” said S&P credit analyst Andrew Palmer.
The rating agency also revised forecast down by about one percentage point each for: Hong Kong, to 1.8 per cent; and India, to 5.5 per cent. For Australia, the forecast is marginally down to 3.0 per cent from 3.2 per cent. The forecasts for other Asian economies remain unchanged except for the Philippines, which went to 4.9 per cent from 4.3 per cent, reflecting the ongoing strength of that domestic economy.
“Our lower forecast for China recognises that the central government had elected not to inject an economic stimulus of a size and speed necessary for an 8 per cent growth rate. It appears that the approach by the Chinese authorities remains influenced by the unpleasant experience of the inflationary effect, particularly on real estate prices, of the stimulus they initiated in late 2008-2009,” noted Palmer.
In turn, the China slowdown has a flow-on effect to the export-oriented Asian economies of Japan, Korea and Taiwan, and the trading port cities of Hong Kong (in particular) and Singapore. The slowdown in China and the economies in the Eurozone and U.S. have also resulted in lower commodity prices.
The lack of monsoon rains has affected India, for which agriculture still forms a substantial part of the economy. Additionally, the more cautious investor sentiment globally has seen potential investors become more critical of India's policy and infrastructure shortcomings.
The credit conditions for rated portfolios in Asia Pacific remains mixed. Base case GDP scenarios are factored into S&P's current ratings in the region. At this stage, the short-term impact of the greater-than-anticipated slowdown on credit ratings is likely to be limited to the more leveraged entities.
“Naturally, any worsening of the economic conditions in the Eurozone will increase contagion risk for Asia Pacific, given the region's - particularly the open economies'--sensitivity to capital flows and trade,” concluded Palmer.
