S&P Global Ratings, in its latest report 'China Slows, India Grows', has said it sees India reaching 7% GDP growth in 2026 as Asia-Pacific's growth engine shifts from China to South and Southeast Asia.
"We project China's GDP growth to slow to 4.6% in 2024 (2023: 5.4%), edge up to 4.8% in 2025, and return to 4.6% in 2026. We see India reaching 7.0% in 2026 (6.4%); Vietnam, 6.8% (4.9%); Philippines, 6.4% (5.4%); and Indonesia remaining steady at 5%," the ratings agency says.
S&P Global Ratings this week raised India’s gross domestic product (GDP) growth forecast to 6.4% from 6% earlier as robust domestic demand offsets headwinds from inflation and weak exports. "We have revised up our projection for India's GDP growth for fiscal 2024 (ending in March 2024) to 6.4%, from 6%, as robust domestic momentum seems to have offset headwinds from high food inflation and weak exports," it said.
In the latest report, S&P Ratings says as Asia-Pacific's central banks are likely to keep interest rates high, the region's borrowers will see costlier debt servicing. "Concurrently, a widening conflict in the Middle East could drag global supply chains and raise energy costs, fanning inflation. High input costs dilute corporate margins, while high prices weaken demand."
The report also talks about energy and demand shock risks, saying Asia-Pacific's growth is susceptible to energy shocks and slower global demand. "We lowered our projection for the region's growth (ex-China) in 2024 from 4.4% to 4.2%. The prospects for industries also differ, with export-centric manufacturing faring worse."
Voicing concerns for China, S&P says despite stimulus, China's property sector remains stressed. Its recent approval of a Chinese renminbi (RMB) 1 trillion sovereign bond issue and allowance for local governments to partially frontload 2024 bond quotas, contributed to our real GDP growth forecast of 5.4% for 2023 and 4.6% for 2024.
However, real estate challenges persist, says S&P. "Demand for new properties remains lackluster, affecting developers' cash flows and land sales (a revenue source of local and regional governments)."
On Global obstacles, S&P says although we anticipate the U.S. and Europe will see a soft landing in 2024, the risk of a hard landing could affect business and households' propensity to spend, slowing demand and hurting revenues.
On the current geopolitical tensions, the ratings agency says while the likelihood of an energy shock is remote, pricier energy and potential disruption of supply chains could reignite inflationary pressures and slow trade.
According to the finance ministry, India's GDP growth outlook for the financial year 2023-24 remains "bright". It also projects the overall GDP growth at 6.5% in the fiscal year. The ministry says the economic activity in the country has maintained its “momentum”, with high-frequency indicators suggesting the second quarter of the fiscal year is also shaping up well.
