Though Japan is still the largest economy in the region, China' growth could position the country as the biggest economy in Asia-Pacific and the second-largest globally within the next five years.
In a report published on Monday titled "The best and the rest: The 2008 Asia-Pacific Sovereign League," S&P's highlights the key quantitative features and trends of its statistical forecasts for 2008 for the 22 rated sovereigns in the Asia-Pacific region.
"We also expect the Indian growth story to continue, with the country at number two in the regional league. In the global growth ranking, dominated by resource-rich nations benefiting from high commodity prices, China and India are still among the top 10 fastest-growing economies. Strong domestic demand is likely to support their economic performances even if demand from the US and Europe weakens," it said.
"We expect regional growth dynamics to be less robust in 2008, with an unweighted average growth rate among rated sovereigns of about 5 per cent compared with 5.8 per cent in 2007 and a record 6.6 per cent in 2004," said Standard & Poor's credit analyst Yee Farn Phua.
While the US slowdown and the tight credit conditions are expected to impact Asia-Pacific but these concerns are partly mitigated by the expected stronger domestic demand and intra-regional trade that should substantially counter the weaker US import demand, the analyst added.
Inflation across the region is likely to remain high by recent standards. Driven by a demand-side oil shock, escalating food prices, and China's unwavering appetite for commodities, even countries such as Singapore -- with historical inflation rates of about 1 per cent -- are expected to tip the 5 per cent mark for the first time.
