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APAC set for robust 2024 growth amid varied economic challenges: Fitch

05 Jan '24

2 min read

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The APAC region is set for robust economic growth in 2024, particularly in emerging markets like India, Indonesia, the Philippines, and Vietnam, with an expected GDP expansion of 5 per cent.
However, slower growth in China, reduced global demand, and recent interest rate hikes pose challenges.
China's economy faces additional headwinds from policy shifts.

Asia-Pacific (APAC) region is forecast to see robust economic growth for 2024, particularly within emerging markets (EMs), according to Fitch Ratings. The agency projects real GDP expansion of 5 per cent or more in India, Indonesia, the Philippines, and Vietnam. Despite this positive outlook, the region faces challenges including slower growth in China, reduced global demand, and the impact of higher interest rates accumulated during 2022-2023. Consequently, most APAC sector outlooks for 2024 remain neutral.

In China, slower economic growth, lower interest rates, and the government's policy adjustments are expected to create additional headwinds for several sectors. A steeper decline in China's growth than currently anticipated could significantly affect issuers in various sectors and have negative credit implications region-wide, as per Fitch.

The peaking interest rate cycle is set to impact developed market (DM) banking sectors in APAC more than those in EMs. Fitch Ratings expects net interest margins (NIMs) and non-performing loan ratios in DMs to face pressure in 2024, with asset quality deterioration most notable in Australia and New Zealand. Conversely, a more rapid easing of monetary policy in the US than forecasted could enable APAC governments to reduce rates quicker, easing borrower interest burdens but intensifying pressure on banking NIMs.

Additionally, Sino-US tensions have shown recent signs of easing. However, Fitch expects these relations to remain strained, prompting companies to continue diversifying their supply chains to mitigate geopolitical risks. This shift is likely to significantly influence sector outlooks, particularly in the industrial sector.

Fibre2Fashion News Desk (DP)

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