China could overtake Japan as the largest economy in the Asia-Pacific region and second-largest globally within the next five years, Standard & Poor’s Ratings Services said yesterday.
Although Japan is currently the region’s largest economy, Standard & Poor’s predicted China will lead Asia-Pacific nations in economic growth this year, followed by India.
Highlighting the key quantitative features and trends, credit analyst Yee Farn Phua forecast “regional growth dynamics to be less robust in 2008,” with an unweighted average growth rate among 22 nations of about 5 percent compared with 5.8 percent last year.
“A slowdown in the US economy and tight global credit conditions will hit the Asia-Pacific region, but these concerns are partly mitigated by the expected stronger domestic demand and intra-regional trade that should substantially counter the weaker US import demand,” Phua said.
Inflation across the region is likely to remain high, the report said.
Driven by a demand-side oil shock, escalating food prices and China’s unwavering appetite for commodities, even countries such as Singapore with historical inflation rates of about 1 percent are expected to tip the 5 percent mark for the first time, the report said.
“Topping the league is once again Sri Lanka, which has the dubious honor of having the highest inflation among Asia-Pacific sovereigns for three years running,” the report said.
On the fiscal front, “Sri Lanka overtook Japan as the biggest net debtor in the region in 2007,” Phua said. The two nations “feature among the most indebted governments globally,” he said.
In terms of external positions, about half of the Asia-Pacific nations have public and private sector assets greater than their total external debt, including non-resident deposits, the report said.
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