There are four Asia Pacific economies that Fitch Ratings expect to grow at least 5% in 2024.
Economic growth in APAC will generally remain strong in 2024, especially in emerging markets (EMs), supporting sector outlooks across the region, the credit rating agency noted.
“We expect real GDP to expand by, or above, 5% in four Asia Pacific economies—India, Indonesia, the Philippines and Vietnam,” the firm said.
However, headwinds from slower Chinese growth, weak global demand and higher interest burdens following the rise in interest rates over 2022-2023 will weigh on many sectors’ performance, and the bulk of our APAC sector outlooks for 2024 remain neutral, Fitch said.
Slower economic growth, lower rates and the government’s adapting policy response will add to headwinds faced by several sectors in China, reflected in a number of deteriorating outlooks, notably for property developers and banks, Fitch predicted.
“A sharper slowdown in China’s growth than we assume would pose significant risks for China-based issuers in multiple sectors, and would have adverse credit ramifications regionally,” Fitch said.
The peaking of the rate cycle will affect APAC developed market (DM) banking sectors more than those in EMs, the firm added.
“We expect net interest margins (NIMs) and non-performing loan ratios to come under pressure in DMs in 2024,” said Fitch. “The degree of weakening will generally be modest, but we expect the worsening in asset quality following higher interest rates will be most marked in Australia and New Zealand.”
A sharper easing of monetary policy in the US than expected could allow governments in APAC to cut rates faster, reducing interest burdens for borrowers, but adding to pressure on banking NIMs, the firm noted.
While Sino-US tensions have eased recently, Fitch said it expects relations to remain challenging, which will lead companies to pursue further supply-chain diversification to limit exposure to geopolitical risks.
These trends could be a significant factor for outlooks in several sectors, particularly industrial and technology, the firm added.
