US Banking Trauma Spillover Onto APAC Is Not Going To Be Significant - S&P Global Ratings
KUALA LUMPUR, April 4 (Bernama) -- The spillover onto the real economy from the banking sector trauma in the United States (US) is not going to be significant for the Asia-Pacific (APAC) region.
APAC chief economist at S&P Global Ratings, Louis Kuijs said economists in the US and Europe have also not made any significant changes on their portfolios forecasts following the recent banking turmoil.
“Recently (last Friday), our S&P Purchasing Managers' Index (PMI) indices just came out and the one on manufacturing saw a significant increase.
“This suggests that among US manufacturers, it does not look like they have massively scaled back their outlook on growth forecast,” he said in a webinar session updating on the economic forecast for China and others in APAC.
Kuijs said as the US core inflation remained elevated, it expected the US Federal Reserve (Fed) to increase its policy rate one more time this year, and does not see a cut in the US interest rate.
He also said that the Fed would deal with the turmoil using liquidity operations and keep its interest rates policy for the real economy.
On China's growth, Kuijs said recovery is taking place with improved economic indicators.
This is led by consumption and services, with the housing market tentatively bottoming out to the extend that it would help in broadening the recovery.
“We expect around 5.5 per cent gross domestic product (GDP) growth in China this year, easing to about 5.0 per cent next year.
"We do not think that recovery in China will lead to high inflation as that we have seen in the West,” he said.
For the rest of Asia, he said the countries were feeling the brunt of the global slowdown and the increase in interest rates across the region.
He said it has seen hard data of the economy for the end of last year and beginning of this year, which suggested a slowdown.
"From the S&P PMI indices that just came out, for most category, they present a mixed bag, there were no rapid decline but also not a big pick up. There was a tentative PMI indices pick-up in February, but if you put all of the countries together (across the region), it did not continue for March.
“We need to wait for positive implications either in the PMI or export data of that recovery in China, which is consistent with our outlook where we expect growth in the region to be affected by the exposure of the slower global growth economic environment and impact of the domestically higher interest rates. We expect growth in 2023 to be lower than that of last year," he said.
S&P Global Ratings which published its quarterly economic update for Asia Pacific on Monday, has not changed its forecasts for Malaysia's real GDP.
It noted Malaysia's forecast growth for 2022 to be at 8.7 per cent year on year, 2023 (3.2 per cent), and 2024 (4.7 per cent).
-- BERNAMA
