S&P Global Ratings has recently made significant revisions to its economic growth forecasts for several Asia-Pacific countries, particularly India and China, amid shifting political and economic landscapes. The agency's latest report highlights the potential impacts of U.S. tariff changes and domestic economic conditions as it outlines predictions for GDP growth through the next couple of years.
On November 25, 2024, S&P Global announced it has lowered its GDP growth projections for India, forecasting rates of 6.7% for the fiscal year 2025-26 and 6.8% for 2026-27. These numbers reflect declines from earlier estimates of 6.9% and 7% respectively. The downgrades are attributed primarily to high interest rates and reduced fiscal impulse, significantly affecting urban consumer demand. According to the report titled ‘Economic Outlook Asia-Pacific Q1 2025: US Trade Shift Blurs The Horizon,’ the high purchasing manager indices (PMIs) indicate growth; the actual momentum seems to be softening due to pressures on the construction sector as seen earlier this year.
"We see GDP growth easing to 6.8% this fiscal year as high interest rates and lower fiscal impulse temper urban demand," noted the S&P Global report. This cautious sentiment suggests several structural challenges as urban consumers, which make up a substantial portion of India’s economy, may spend less as inflation and costs increase.
Meanwhile, S&P Global maintains its GDP growth forecast for China at 4.8% for the year 2024 but has cut future projections significantly. The firm estimates GDP growth will dip to 4.1% for 2025—a reduction from the previous estimate of 4.3%—and continue to decline to 3.8% for 2026, down from 4.5%. These decreases are partly driven by anticipated U.S. tariff hikes on Chinese exports, which could substantially diminish growth opportunities for the Chinese economy as it grapples with the dual challenge of external pressures and internal economic issues.
According to S&P Global, the upcoming changes in the U.S. administration could also bring about complications for China and the Asia-Pacific region. With rising U.S. tariffs more likely against Chinese goods, market dynamics could shift, prompting China to confront increased barriers to trade, which could affect its overall economic growth. This uncertainty surrounding U.S. economic policy may lead to heightened volatility across global markets and economies closely tied to China.
Despite these challenges, S&P highlighted some positive developments within China. The Chinese government has been proactive with stimulus measures aimed at shoring up growth, especially within its property market, which has been experiencing struggle over the past year. Measures have included fiscal adjustments meant to address local government debt and alleviate some pressure on their investment climate.
Louis Kujis, the Asia-Pacific Chief Economist at S&P Global, commented on the uncertain economic outlook: “Rising risks are blurring the economic outlook for Asia-Pacific in the first quarter of 2025. While much of the region should be able to continue to grow solidly, central banks will probably remain cautious by not reducing their policy rates too fast.” His frustration mirrors the concerns echoed by various businesses and analysts focused on forecasting economic shifts.
Staying on the topic of Asia-Pacific economies, S&P Global indicated several economies could be affected indirectly by the expected movements within the U.S.-China trade arena. For nations relying on exports heavily, especially those with surplus trade balances with the U.S., the risks are becoming increasingly apparent as the changing trade policies are implemented. While there is the potential for new trading opportunities for some countries, the simultaneous challenges posed by reduced demand from China itself can create complicated ripple effects throughout the region.
Among the broader Asia-Pacific economic outlook, Malaysia might stand to benefit somewhat, with S&P projecting GDP growth at 4.9% for 2025. This is primarily because Malaysia has developed substantial trade ties with other Southeast Asian countries, alongside its integration within global supply chains. These growth figures are not as high as previous forecasts—roughly 5.5% for 2024—but it is still deemed relatively positive compared to its regional peers.
While the overall domestic demand within Southeast Asia remains strong, bolstered by recovering tourism sectors and electronics manufacturing, S&P identifies the semiconductor market is likely to cool down, which may influence production activities moving forward. Recent forecasts for the greater Asia-Pacific region point toward modest growth, with estimates reflecting growth declining from 4.4% to 4.2% for 2025 and holding at 4.1% for 2026.
Essentially, as Asia grapples with the uncertainties related to U.S. tariffs on Chinese goods and the shifting economic policies of the new U.S. administration, S&P Global's comprehensive evaluation shows both risk and opportunity abound. It is clear more scrutiny will be necessary as those nations navigate through complex economic waters fueled not only by domestic imperatives but also by the interconnected nature of global markets. The forecast highlights the importance of adaptive economic measures to withstand imminent external shocks and internal challenges.
The global economic narrative continues to evolve, and analysts, policymakers, businesses, and the general public will be paying closer attention to these annual projections as they shape the future outlook for growth across the region.
