In the “Asia-Pacific: Ghosts of Covid Past Hover Over 2022” report, S&P said it has marginally lowered South-East Asia’s forecast growth in 2021 to 3% from 3.1% earlier.
The region had a weak economic performance in the third quarter, although this was in line with S&P’s expectations.
However, the ratings agency said mobility has been recovering as new Covid-19 cases continue to decline and a greater economic opening takes place.
“This is leading to a gradual improvement in domestic demand and widening improvement in manufacturing activity in the fourth quarter,” it said yesterday.
Commenting on Malaysia, S&P said tight lockdowns and limited fiscal stimulus compared with 2020 caused the domestic economy to contract by 4.5% in the third quarter.
With the weak third quarter weighing down full-year growth, S&P lowered its 2021 growth forecast for Malaysia to 2.6% from 3.2% earlier.
“The weak base in 2021 has prompted us to raise our forecast 2022 growth to 6.3%, from 6% earlier. In contrast, growth in the Philippines surprised on the upside with year-over-year expansion of 7.1%.
“We mark growth in the Philippines higher at 5% in 2021 compared with our forecast of 4.3% earlier,” it said.
Across Asia-Pacific, apart from Malaysia, S&P has also downgraded its 2021 growth forecasts for Japan, Vietnam and Australia as pandemic escalations weighed on the third-quarter economic activity.
“Higher vaccination coverage and gradual reopening mean that fourth quarter activity in Asia will be strong and that the outlook for 2022 is stabilising,” it said.
The ratings agency also said that Covid-19 policies in Asia-Pacific have put regional economies on a weaker recovery path in 2022 than the rest of the world.
The post-vaccination discovery phase of the pandemic has made Asia-Pacific a “global laggard”, it added.
“While the region was highly successful in curbing the spread of the virus early in the pandemic, it was slow to vaccinate and is now only gradually reopening borders and relaxing mobility.
“S&P Global Ratings believes the region’s vaccination coverage and economic reopening have just recently reached levels that can sustain a recovery that has faltered all year,” it said.
On inflationary pressure, the ratings agency said it is well-controlled in Asia-Pacific, in contrast to elsewhere.
Core inflation remains low, reflecting a sluggish consumer demand. It is likely to rise over 2022 as economic reopening leads to improved domestic demand.
“As a result, monetary policy across much of the region is set to remain accommodative,” according to S&P.