Asia will lead global economic growth - S&P MD

Sanjeevi JAYASURIYA

The Asian region will lead the global economic growth where the regional economic outlook appears bright, but residual risk remains to be addressed.

The capital markets are critical for financing growth and to achieve region's ambition.

The growth which was moderate in 2010 will reach sustainable levels in 2011 following the strong economic rebound.

The growth will also be broad based with positive macro economic outlook, Standard & Poor Managing Director Surinder D Kathpalia said.

Addressing a seminar on strong growth should counter challenges in 2011 held in Colombo, he said the capital inflows will impact asset value and currency rates while concerns over volatility and quality of inflows will continue.

"The inflation risk due to asset price pressure and food inflation will be key concerns," he said.

The other risks include potential trade conflicts and the possible imposition of capital controls, geopolitical tensions and disruption to the global recovery. The credit outlook is expected to improve in 2011 with robust regional economic growth.

Exports will remain competitive as 2010 proved a turning point with upgrades exceeding downgrades. The credit features of 2011 expect most sectors outlook to remain stable and positive.

The policy challenges have intensified and there may be an impact due to the events in the Middle East on Asia. The Asian region will affect by the global structural imbalances. The need to search for new sources of growth is necessary.

"The risk to economic growth from slower US growth and Euro Zone debt woes and heavier debt burdens and budget deficits will not allow additional fiscal stimulus should it be needed. Therefore, it is necessary to have financial reforms to face these challenges, Kathpalia said.