S&P says Asia set for solid growth despite Japan crisis

SINGAPORE: 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 (S&P) said Wednesday.

“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.

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 euro-zone economies, S&P 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, the rating firm 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,” S&P said.

“We expect the region’s central banks to continue to tighten monetary policy this year.”

That means central banks will raise interest rates to fight inflation.

S&P also said regional central banks may consider further capital control measures and other actions to prevent risky asset bubbles.

Powerhouse China is projected to grow 9.1 percent to 9.6 percent in 2011, lower than last year’s 10.3 percent and this is expected to impact the rest of the region, the rating firm said.

“Chinese authorities are adopting measures to rein in expansionary monetary policy to help combat rising inflation, escalating asset prices, and higher wage inflation,” S&P said.

“We expect these tightening measures are likely to prune money supply and credit growth in 2011. Slowing growth in China is likely to drag on growth around the region, in our view, with many nations beginning to post softer growth numbers.”

Japan, which is struggling to cope with the devastation wrought by a magnitude 9.0 earthquake, a tsunami and a crisis at a nuclear power station, is seen as growing 1.3 percent to 1.8 percent. The world’s third largest economy expanded 4.0 percent last year.

South Korea’s economy is projected to grow 4.3 percent to 4.8 percent from 6.1 percent in 2010.

Within Southeast Asia, Singapore’s growth is to moderate sharply to 4.5 percent to 5.0 percent from 14.5 percent last year. Malaysia is seen expanding 4.8 percent to 5.3 percent and Indonesia, 5.9 percent to 6.4 percent from last year’s 6.1 percent.

The Philippines is expected to grow 5.1 percent to 5.6 percent this year from 7.3 percent in 2010, while Thailand’s economy will ease to 4.0 percent to 4.5 percent from 7.8 percent last year. –AFP