In a newly released report, Moody's Investors Service, revised downwards its GDP growth forecast for 2019-20 for 16 economies in Asia Pacific, including India.
In India, the moderation in business sentiment and slow flow of credit to corporates have contributed to weaker investment in the country, the report stated.
Of the 16, Hong Kong and Singapore have shown particularly weak expansions this year, with very large deteriorations in real GDP growth when compared to the first half of 2018.
“We project the slowest rates of growth since the global financial crisis for Hong Kong, Singapore and Korea,” the report stated, adding, “While not heavily exposed to external pressures, India’s economy remains sluggish on account of a combination of factors, including weak hiring, financial distress among rural households, and tighter financing conditions due to stress among non-bank financial institutions.”
Moody's explained that externally-oriented economies saw a sharper slowing during the first six months of 2019, while domestic factors have had a greater influence on growth in Japan, India and the Philippines.
Moody's report covers the economies of Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Mongolia, New Zealand, the Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam. The report also pointed out that the weaker global economy has stunted Asian exports and the uncertain operating environment has weighed on investment. In particular, softer capital formation has mirrored the weakening in exports, especially for trade-reliant economies such as Korea and Hong Kong.
It also said that the slower overall GDP growth in the region has not yet weighed significantly on broader employment conditions, while generally benign inflation supported purchasing power across Asia Pacific. Sharp decline in exports in Korea, Japan, Malaysia, Singapore, and Hong Kong are related to softening global conditions. Slowing export momentum suggests prolonged weakening as final demand in the US, China decelerates into 2020.
Softer capital formation has mirrored weakening in exports, especially for trade-reliant economies such as Korea and Hong Kong, with weakening in the latter also reflecting political developments. Separately, the delay in the passing of the government budget in the Philippines has disrupted its infrastructure building plans, while fiscal tightening has posed similar drags in Malaysia and Sri Lanka. Also cooler business sentiment and slow flow of credit to corporates contribute to weaker investment in India, the report added.