While US tariffs are hitting China's exports, relatively resilient domestic demand should contain the economic slowdown there. The rating agency expects China's GDP growth to be 4.3 per cent in 2025 and 4 per cent in 2026.
China’s exports are expected to slow in the second half of the year, while imports will be subdued this year and next, but not as weak as exports.
S&P Global expects China’s consumer price index (CPI)-based inflation and the change in the GDP deflator to remain very subdued in 2025 and 2026. That is amid excess capacity in many sectors and additional downward pressure on prices from the redirection of sales in the face of US tariffs.
With inflation not a major risk, more focus on growth risks and external factors unlikely to significantly constrain monetary policy easing, Asia-Pacific central banks are expected to continue to cut policy rates, S&P Global said in a release.
Higher uncertainty, subdued income growth and elevated cost of living pressures have dampened domestic demand in South Korea, Japan, Australia and India.
Several Asian economies will be exposed to the sector-specific tariffs the US government said it will impose on pharmaceutical products and semiconductors.
Meanwhile, attempts to redirect Chinese shipments away from the United States will likely challenge sectors and companies in the region.
Solid domestic demand and stable macroeconomic fundamentals in the Asia-Pacific region should contain the slowdown in 2025 and 2026.
The absence of inflationary pressure and major external deficits provides a buffer in the region in case policymakers want to ease macroeconomic policy to support growth, S&P Global added.
ALCHEMPro News Desk (DS)
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