Consumption key driver for growth: S&P

However, the drivers for growth in the region are changing, it said in its report on “Can Asia-Pacific Capitalise on Its New Growth Drivers?” published yesterday.
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.
The region’s new growth driver will now be consumption by the rising middle class. The leader will be China, as the region’s largest economy rebalances to a less investment-heavy model.
“Asia-Pacific will need to adapt to changes in the growth drivers to ensure continued relatively strong, balanced and sustainable growth,” said Paul Gruenwald, chief S&P economist for Asia-Pacific.
“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.”
Relatively sluggish growth is forecast for the Asia-Pacific region. There is also a steadily narrowing gap between developed and emerging markets, which have tended to slow more quickly.
“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.
“And for emerging Asia, we see growth sliding to 6 per cent in 2016 and 2017. “We continue to see the risks around our baseline forecast as tilted to the downside,” he said.
“However, these are now less driven by China and more balanced overall.”
India has overtaken China as the region’s growth leader, at least for now. At the other end of the spectrum, the more trade-dependent “Tiger” economies – such as Hong Kong, Singapore, South Korea and Taiwan – will continue to struggle.
Gross domestic product in this group will grow by just 2.0 per cent, with only a modest recovery in the next two years, with growth remaining below 3 per cent, S&P forecasts.