In its recent report titled ‘China Slows, India Grows,’ S&P Global Ratings predicts a shift in Asia-Pacific’s growth engine from China to South and Southeast Asia. The agency anticipates a slowdown in China’s GDP growth to 4.6% in 2024 (compared to 5.4% in 2023), with marginal increases to 4.8% in 2025 and a return to 4.6% in 2026.
In contrast, India is forecasted to achieve a 7.0% GDP growth in 2026 (up from 6.4%), positioning it as a significant contributor. S&P Global Ratings recently revised India’s GDP growth forecast for fiscal 2024 to 6.4%, citing robust domestic demand offsetting challenges from high food inflation and weak exports.
The report highlights global challenges stemming from unfavourable geopolitical events. Anticipating that Asia-Pacific central banks will maintain high-interest rates, the region’s borrowers may face increased costs for debt servicing. Additionally, an escalating conflict in the Middle East could disrupt global supply chains, elevate energy expenses, and contribute to inflation.
The report expresses concerns about the potential impact on corporate margins and demand due to high input costs and elevated prices. Specifically, a widening Middle East conflict is identified as a risk, prompting a downward revision of the region’s growth projection (excluding China) for 2024 from 4.4% to 4.2%. It underscores Asia-Pacific’s vulnerability to energy-related shocks and potential slowdowns in global demand, particularly the risk of a U.S. economic downturn. It also notes variations in industry prospects, with export-oriented manufacturing expected to face greater challenges.
Regarding global challenges, S&P foresees a soft landing for the U.S. and Europe in 2024 but highlights the risk of a hard landing, which could dampen spending by businesses and households, slowing demand and affecting revenues. Addressing geopolitical tensions, the agency considers the likelihood of an energy shock as remote but points out that pricier energy and potential disruptions in supply chains may rekindle inflationary pressures and impede trade.
India stands out as one of the rapidly advancing major economies globally. The International Monetary Fund (IMF) recently increased its projection for India’s GDP growth in 2023-24 to 6.3%, marking a 20-basis point rise from the July figures. The World Bank, in its biannual review, has likewise maintained India’s economic growth forecast for the same period at 6.3%, even amidst challenging external conditions.