S&P Lowers 2012 GDP Growth Forecasts For China To 7.5%, India To 5.5%, And For Most Of Asia

2012--A trifecta featuring a slowdown
in China, ongoing troubles in the Eurozone, and a weaker recovery in the U.S.
has lead Standard & Poor's Ratings Services to forecast lower economic growth
rates for Asia Pacific.
"We have lowered our base case forecasts of 2012 real GDP growth by about half
a percentage point for China to 7.5%; Japan to 2.0%; Korea (Republic of) to
2.5%; Singapore (Republic of) to 2.1%; and Taiwan to 1.9%," said S&P credit
analyst Andrew Palmer.
We have also revised our forecast down by about one percentage point each for:
Hong Kong, to 1.8%; and India, to 5.5%. For Australia, the forecast is
marginally down to 3.0% from 3.2%. The forecasts for other Asian economies
remain unchanged except for the Philippines, which went to 4.9% from 4.3%,
reflecting the ongoing strength of that domestic economy. That's according to
a report published today by Standard & Poor's titled, "Asia-Pacific Feels the
Pressure of Ongoing Global Economic Uncertainty".

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"Our lower forecast for China recognizes that the central government had
elected not to inject an economic stimulus of a size and speed necessary for
an 8% 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 Mr. 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. We
have factored our base case GDP scenarios into our current ratings on and
issues 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 Mr.
Palmer.