Standard and Poor’s lifts India, raises growth figures

GDP growth forecasts for China and Japan lowered

GN Bureau | February 26, 2015



On the eve of general budget, the ratings agency Standard & Poor’s has raised India’s growth forecasts.

It raised India GDP growth forecast to 7.9 percent from 6.2 percent for the year ending March 2016, due to rising investment and low oil prices. The agency also raised the forecast for 2016/17 to 8.2 percent from 6.6 percent previously.

The revisions come after the country changed its economic indicators and the way it is calculated.

“India should be the Asia-Pacific region’s bright spot,” S&P said in a statement. S&P currently rates India at “BBB-” with a “stable” outlook.

The agency earlier this week said India must boost growth, cut its fiscal deficit and fulfill promises of financial and fiscal reforms to justify an upgrade in a credit rating.

Meanwhile, the Standard & Poor's has lowered its GDP growth forecasts for China, Japan, and the Asian Tiger economies in a report "Stronger US economy and lower oil prices aren't boosting Asia-Pacific growth."

The twin factors of strengthening US economy and lower oil prices have yet to lift economic data in much of Asia-Pacific region.

Central banks have shifted their stance in recent months, with a critical group of monetary policymakers cutting rates or easing financial conditions and the remainder moving to a more neutral stance.

This runs contrary to what was observed until the latter part of 2014. Weaker growth in China and Japan may be weighing on overall sentiment.

Standard & Poor's trimmed GDP growth forecasts for China to 6.9% this year and 6.6% in 2016, from 7.1% and 6.7%, respectively.

"For Japan, we have lowered our growth forecast to 0.7% this year (from 1.3%) and 1.3% in 2016 (2.1% previously)," said Paul Gruenwald, Asia-Pacific Chief Economist.

"Japan is likely to struggle to achieve a meaningful uplift in growth this year, owing to base effects from the poor fourth-quarter performance in 2014. We believe growth and core inflation can gradually climb higher, now that the Japanese government has postponed the second leg of its consumption tax hike until early 2017."

"We now expect slightly lower real GDP growth in Asia-Pacific, but significantly lower inflation, higher current accounts, weaker currencies, and more accommodative monetary policy stances, despite our steadfast view that the US Federal Reserve will begin its long-awaited rate hikes this summer," Gruenwald said.

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