Region steady despite risks
Macroeconomic risks for Asia-Pacific have risen but our baseline for the latest assessment of the region's credit conditions remains broadly unchanged, said S&P Global Ratings in a report released today, titled "Escalating Trade Measures Reorder Macro Risks In Asia-Pacific."
Risks to S&P Global Ratings' baseline have reordered with trade tensions moving to the top of the list ahead of capital market volatility related to US Federal Reserve policy normalisation, and deleveraging in China.
Despite rising trade tensions, Asia-Pacific's macroeconomic data continue to look healthy.
“There were no macro surprises out of China, which grew by 6.8 per cent year on year in the first quarter,” said S&P Global Ratings' Chief Economist Paul Gruenwald. "But we wonder how long quarterly growth can remain above the official 6.5 per cent target for this year, given steadily increasing evidence that deleveraging efforts are intensifying."
S&P Global Ratings expects China's growth to decelerate further to 6.3 per cent next year, and 6.1 per cent in 2020, partly because of slower credit expansion.
Trade momentum measures showed a minor uptick in recent months after declining earlier. However, we view this as at least partially related to frontloading of demand before trade tensions escalated. Moving forward, we expect headwinds from the ongoing trade war and onshoring trends in the U.S., India, and China to counteract partly the benefits of stronger U.S. growth outlook on trade.
All told, we are not expecting a strong pick-up in Asia-Pacific trade growth.
