New Delhi, Nov 25 Much of the Asia-Pacific region is expected to grow solidly in the first quarter of 2025, although China will take a big hit due to the challenges posed by the new US administration to be headed by Donald Trump, according to an S&P Global report released on Monday.
Higher US tariffs on Chinese exports would make other Asian economies more competitive in the US and they may attract more foreign direct investment, including from US firms, said the report.
It stated that a gradual fall in interest rates and inflation should ease their drag on spending power, allowing growth to pick up in 2025 in several Aia-Pacific economies. In emerging markets, robust domestic demand growth is generally supporting solid overall growth, even as it is moderating in some.
While much of the Asia-Pacific region should be able to continue to grow solidly, central banks will probably remain cautious by not reducing their policy rates too fast. The impending change in the US administration will be challenging for China and the rest of Asia-Pacific.
“US tariff increases have become more likely, especially on China, and possible changes in the U.S. macro picture are leading to different interest rate expectations. And risks have gone up due to slower global demand and US trade policy,” the report pointed out.
According to the S&P report, swings in capital flows driven by shifts in expectations about U.S. interest rates and trade policies require central banks to be vigilant and cautious. “We expect Asia-Pacific central banks to take their time bringing policy rates down”.
While China's stimulus measures should support growth, we expect its economy to be hit by US trade tariffs on its exports. While China’s GDP growth has been projected at 4.1 per cent in 2025, India is expected to grow at a more robust 6.8 per cent during 2025.
The change of administration in the US implies a large degree of uncertainty around the baseline. That is true for US growth, inflation and interest rates, with implications for the rest of the world. In addition, the potential for new trade restrictions and trade conflicts has risen, the report said.
“We now see fewer US Federal Reserve interest rate cuts in 2025. We expect one more in December. But we now see only three cuts in 2025 and think the terminal level of 3 per cent-3.25 per cent will be reached only in late 2026. We expect the policy rate to reach the terminal level of 2.5 per cent already in the first quarter of 2025,” the report stated.
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