Defaults among APAC high-yield nonfinancial firms will decline in 2023, with the default rate falling to 4.9% from 11.7% in 2022, although remaining in line with the 10-year average default rate, said Moody’s recently.
"The forecast rate reflects worsening operating and credit conditions for Asia Pacific companies because of slowing global economic growth, an uneven rebound of China's economy, and continued tight monetary policy and high interest rates,” noted Clara Lau, Moody's senior vice president and group credit officer.
Global economic growth will remain subdued for the rest of 2023 and in 2024, with advanced G-20 economies forecast to grow 1.4% in 2023 and 1.0% in 2024 amid elevated interest rates as inflation persists, the credit rating agency said.
China's real GDP will likely grow 5.0% in 2023 and moderate to 4.0% in 2024, the firm added.
To contain inflation, major central banks will likely maintain high-interest rates and a restrictive policy stance through 2024, with the exception of China, which will continue to ease monetary policy to boost economic growth, according to Moody’s.
High-interest rates, asset price volatilities and investor risk aversion will continue to constrain funding access for APAC high-yield nonfinancial firms.
China's economy will continue to face significant growth challenges amid persistent weakness in the property sector and large local government financing vehicle (LGFV) debt, Moody’s said.
Investor and consumer confidence remains subdued, evidenced by muted private investment and consumer spending, the firm noted.
Refinancing risk for property developers will remain high, given their sizable upcoming maturities and limited funding access, the firm added.
There were two defaults in the first half of 2023, bringing the trailing 12-month default rate for APAC high-yield nonfinancial corporates to 8.1% at the end of June 2023, Moody’s observed.
