Asia-Pac's economy seen to grow to 5.45% in 2014

But credit conditions may tighten.

According to Standard and Poor's Ratings Services, credit conditions for Asia-Pacific issuers have improved in the fourth quarter of 2013 because China's GDP growth has stabilized at about seven-and-a-half percent and the likelihood of a hard landing has abated in the near term.

The report says that regional growth will rise fractionally from 5.3% in 2013 to 5.4% next year, while emerging Asia will see growth rise 0.3 percentage points (ppt) to 6.3% over the same period.

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In addition, the risks to Asia-Pacific from U.S. Federal Reserve's tapering of quantitative easing (QE) have lessened, as external imbalances in Asia-Pacific's key deficit countries narrowed as a result of capital outflows in mid-2013.

"However, looking ahead into 2014, we anticipate credit conditions could tighten again and become more volatile as QE tapering affects market interest rates," said Standard & Poor's credit analyst Andrew Palmer. "Still, the impact of U.S. Fed taper-driven capital outflows has lessened with substantial external adjustment already having taken place in Asia's deficit economies."

"We consider baseline growth will be pretty steady for the region. If the U.S. economy and global trade growth both pick up steam, as we expect, then GDP growth in Asia, led by the more open economies, should be able to grind higher," added Standard & Poor's chief economist for Asia-Pacific Paul Gruenwald.

China is on track for 7%-7.5% growth in 2014, while Japan's ability to digest a 3 ppt consumption tax hike in April is a key test for Abenomics. But Asia's Tiger economies--Korea, Hong Kong, Singapore, Taiwan--look set to outperform in 2014.

"However, this trajectory of regional growth will continue to stress some countries and industry sectors," said credit analyst Terry Chan. "We believe the economies of Indonesia, Philippines, Thailand, and Vietnam have high country risks.

In addition, the sovereign ratings on India and Japan are on negative outlooks, which have a knock-on effect on the ratings on public finance entities there. On a sectoral basis, financial institutions and companies in the chemicals, building materials, and metals and mining industries have among the highest net ratings biases."