Tiger economies to struggle at 2% growth, says S&P

SINGAPORE - Growth in Asia-Pacific in 2016 and 2017 is likely to be sluggish but still better than that in the rest of the global economy. But the drivers for growth in the region are changing, says ratings agency Standard & Poor’s in a report titled: "Can Asia-Pacific Capitalise On Its New Growth Drivers?

Exports and productivity, which have traditionally driven Asia-Pacific economies, have entered a new and much slower growth phase, the report says, with both the (real) net export contribution to growth and productivity growth stalling since the global financial crisis.

“The region's new growth driver will now be consumption by the rising middle class,” the report says. The leader of this drive 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," says Paul Gruenwald, S&P's Asia-Pacific chief economist.

"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."

S&P is now projecting 5.3% growth for the region for 2016 and 5.2% for 2017, down fractionally from previous estimates. For emerging Asia, it sees growth sliding to 6% in 2016 and 2017.

"We continue to see the risks around our baseline forecast as tilted to the downside," says Gruenwald. "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, the report notes. At the other end of the spectrum, the more trade-dependent "Tiger" economies (Hong Kong, Singapore, South Korea, and Taiwan) will continue to struggle.

GDP growth in this group will reach just 2.0%, with only a modest recovery in the next two years, with growth remaining below 3%. www.standardandpoors.com (ATI).