Asia is poised for another year of solid growth in 2011 even if the impact of the killer earthquake and tsunami on Japan remains unclear, Standard and Poor’s said yesterday.
“We expect the region to record another year of solid growth in 2011 after 2010 proved that Asia is emerging from the (global financial) crisis in a strong position, even as the economic picture for Japan following the recent earthquake remains less clear,” said Tom Schiller, a senior regional analyst.
“But growth presents a unique set of challenges for policy makers, officials, and investors across the Asia-Pacific region,” he said.
However, growth for the region with the exception of Australia and New Zealand is expected to moderate slightly from last year because of ongoing worries over the US and eurozone economies, Standard and Poor’s said.
Inflationary pressure is a key concern for the region, which faces the prospect of tighter monetary policies as authorities seek to temper price rises, it said in its twice-yearly regional outlook.
“Rising prices stem in part from rapid growth and the easy credit conditions that the region’s governments put in place to support their economies during the global financial crisis,” the credit ratings firm said.
“We expect the region’s central banks to continue to tighten monetary policy this year,” it said, referring to raising interest rates to fight inflation.
In a separate report, Moody’s Analytics said the global economy was not expected to be affected badly by the crisis in Japan. “The world economy will feel the effects of Japan’s disaster mainly through adjustments in financial markets, but the impact on global growth will be small,” said Moody’s Analytics, a division of Moody’s Corporation.
Japan accounts for around seven per cent of global output and “a near-term contraction in the Japanese economy thus will subtract little from global gross domestic product growth”, it said.
The subsequent rebuilding of damaged infrastructure financed by emergency public spending will boost long-term growth, it added.
“The destruction wrought by the earthquake, tsunami, and subsequent nuclear plant explosions will depress household and business sentiment. “Yet consumers will not hold back from reconstruction-related spending; this will add to economic activity later in the year,” it said.
In its report on Asian economies, Standard and Poor’s said regional central banks may also consider further capital control measures and other actions to prevent risky assets bubbles.
China is projected to grow 9.1-9.6 per cent in 2011, lower than last year’s 10.3 per cent and this is expected to weigh on the rest of the region, it said.
“Chinese authorities are adopting measures to rein in expansionary monetary policy to help combat rising inflation, escalating asset prices, and higher wage inflation,” it added.
“We expect these tightening measures are likely to prune money supply and credit growth in 2011.”
Japan, which is struggling to cope with the devastation wrought by a magnitude 9.0 earthquake and tsunami on Friday, that triggered a crisis at a nuclear power station, would grow 1.3-1.8 per cent, slower than last year’s four per cent.
South Korea’s economy is projected to grow 4.3-4.8 per cent from 6.1 per cent in 2010.
Within Southeast Asia, Singapore’s growth is to moderate sharply to 4.5-5.0 per cent from 14.5 per cent last year, Malaysia is seen expanding 4.8-5.3 per cent and Indonesia to grow 5.9-6.4 per cent from 6.1 per cent.
The Philippines is forecast to grow 5.1-5.6 per cent from 7.3 per cent and Thailand’s economy would ease to 4.0-4.5 per cent from 7.8 per cent.