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Informist, Thursday, Dec. 12, 2024

 

MUMBAI – Even as corporate credit conditions are expected to remain highly differentiated across countries and sectors in the Asia-Pacific region over the next 12 months, India will likely see a positive momentum in corporate spending, S&P Global Ratings said in a report on Thursday. Capital spending globally is likely to slow down over the next 12 months amid uncertainty over tariffs, the ratings agency said. However, the expansion of credit in India and Indonesia remains pronounced over the next one year, S&P Global said, adding that this expansion underlines growth and capital inflows.

 

The operating performance in the Asia-Pacific region is set to be largely muted amid soft consumer sentiment, a lack of visibility on export markets amid potential tariffs, and volatile commodity prices, the report said. 

 

Flagging the risks to global growth due to US President-elect Donald Trump's policy plans, the rating agency said that while higher tariffs could be imposed on Chinese exports, there are similar risks to exports from other Asian economies as well. "The political changes in the U.S. imply a particularly high degree of uncertainty," the ratings agency said. S&P Global expects a sharp hike in US tariffs to impact export-dependent sectors like consumer and capital goods, automobile, technology, and metals.

 

In the base case, S&P Global anticipates a rise in the effective US tariff rate on imports  from China to 25% from 14% from the second quarter of 2025 (Apr-Jun). The ratings agency also expects a retaliation by China in kind. If inflation in the US rises again due to the tariffs, S&P Global expects the Federal Reserve to slow its monetary policy easing. "Asia-Pacific central banks could keep rates high to limit outflows. A strong U.S. dollar, narrower offshore funding access, and costlier interest pose strains," the ratings agency said.

 

Countries that have a higher trade surplus with the US, such as India, Vietnam, Thailand, and Malaysia, could be vulnerable to universal tariffs. "The global trade slowdown could curb growth and the revenue of Asia-Pacific exporters," S&P Global said. S&P Global expects India's real gross domestic product to grow 6.8% in 2024, 6.7% in 2025, 6.8% in 2026 and 7.0% in 2027.  End

 

Reported by Anand JC

Edited by Tanima Banerjee

 

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