Washington: India has emerged as the brightest spot in the Asia Pacific region as reform has picked up pace in the country in recent months, a top credit rating agency has said.
"India has been the region's brightest spot since our last report. After a modest beginning, Prime Minister (Narendra) Modi's government has picked up the pace of reform, eliminating the diesel subsidy in early November, liberalising foreign investment into the insurance sector, and curbing discretionary government spending for the second half of the current fiscal year," the Standard & Poor's Ratings Services said.
Confidence has improved and growth momentum is now at around 7%, S&P said in its latest quarterly updates on credit conditions in North America, the Asia-Pacific region, Latin America and Europe.
In the Asia Pacific region, Australia's GDP growth continues to trend at around three per cent, buoyed by reasonably solid consumption and still-strong real exports, despite falling iron ore prices, it said.
Banks and bond investors appear incrementally cautious and selective with their investments throughout the region.
"Our issuer ratings outlook eased slightly to a net negative bias of 11% at the end of October, in line with receding concerns about India. However, the ratio remains high compared to other regions. Cyclical industries such as transportation, building materials, chemicals, real estate development, and capital goods have above-average negative biases," the agency said said.
Some Asia-Pacific economies, it said, are ending 2014 on a relatively lower note than expected, as China's growth momentum slows under a weaker property market, Japan slips into recession, and external demand has yet to meaningfully improve.
Financial sector turbulence arising from China's property sector could have effects beyond China.
While a stronger US recovery is export-positive, the concurrent higher hike in the Fed Funds rate could cause stress if not managed, it said.
"Against this backdrop, we see the credit cycle continuing to adjust to slower economic prospects, as well as high household and corporate debt in several countries weighing on some sectors' credit outlooks," it said.
The US economic recovery is strengthening, and Standard & Poor's expects this trend to continue in the fourth quarter and through 2015, boosted by growing momentum in the labor and housing markets.
