New Delhi [India], January 5 : Economic growth is set to be a driving force in the Asia-Pacific (APAC) region in 2024, particularly in emerging markets (EMs), providing a favourable backdrop for various sectors, reported Fitch Ratings.
According to Fitch Ratings, while strong real GDP expansion is anticipated in India, Indonesia, the Philippines, and Vietnam, challenges from slower Chinese growth, subdued global demand, and increased interest burdens following a rise in interest rates may temper sector performance.
The outlook suggests that most APAC sectors are expected to maintain a neutral stance for 2024, taking into account the counterbalancing forces at play.
While emerging markets are poised for robust growth, sectors in China are facing headwinds due to slower economic growth, adapting government policies, and lower interest rates.
Notably, the outlook for Chinese property developers and banks appears to be deteriorating.
The report underscores the potential risks associated with a sharper slowdown in China's growth, which could reverberate across various sectors, posing adverse credit implications regionally.
The evolving economic dynamics, government policies, and global market conditions will significantly influence the trajectory of sector-specific outlooks.
The peaking of the interest rate cycle is expected to impact banking sectors in APAC-developed markets more than those in emerging markets.
Fitch foresees pressure on net interest margins (NIMs) and non-performing loan ratios in developed markets during 2024.
While the weakening is anticipated to be modest, Australia and New Zealand may experience more pronounced challenges in asset quality following higher interest rates.
The potential for a more substantial easing of monetary policy in the United States could influence APAC governments to cut rates faster, alleviating interest burdens for borrowers but intensifying pressure on banking NIMs.
While the recent easing of Sino-US tensions is noted, Fitch anticipates continued challenges in the relationship, prompting companies to pursue further diversification of supply chains.
This strategic move aims to mitigate exposure to geopolitical risks. These evolving trends could significantly influence sector outlooks, particularly in industrial and technology sectors, where supply-chain dynamics play a pivotal role.
As geopolitical dynamics continue to shape the economic landscape, companies across various sectors in APAC are expected to carefully navigate the complexities of Sino-US relations and pursue strategic measures to bolster resilience against external challenges.
The neutral outlook for most APAC sectors in 2024 reflects a delicate balancing act amid the intersection of robust regional growth and sector-specific challenges.
Sector participants will need to remain agile in responding to evolving economic conditions and geopolitical developments to secure their financial stability and growth prospects.
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