Economic growth in APAC will generally remain strong in 2024, especially in emerging markets (EMs), supporting sector outlooks across the region. Fitch Ratings expects real GDP to expand by, or above, 5% in India, Indonesia, the Philippines and Vietnam, and China’s performance will still be strong by most other countries’ standards.
Headwinds from slower Chinese growth, weak global demand and higher interest burdens following the rise in interest rates over 2022-2023 will weigh on performance for many sectors, but the bulk of the APAC sector outlooks for 2024 remain neutral. Diverging Prospects for EM and DM Banks: Growth in APAC EMs should buoy loan demand and limit the potential adverse effects on asset quality from interest rates, which the agency believes have largely peaked across the region. The peaking of the rate cycle will affect APAC developed market (DM) banking sectors more than those in EMs. Fitch expects net interest margins (NIMs) and nonperforming loan ratios to come under pressure in DMs in 2024, but the degree of weakening will generally be modest.
Deteriorating Outlooks Concentrated in China, Australia and New Zealand: 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. For details, see our Greater China Cross- Sector Outlook 2024 report. Fitch says the outlooks for the Australian and New Zealand banking sectors and structured finance sectors
remain deteriorating for 2024. Our expectation is that the worsening in asset quality following higher interest rates will be most marked in these markets, being felt more in 1H24 than 2H24. Geopolitical Risk Remains a Factor: Sino-US tensions have eased recently, but we expect 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, and may also influence investment and growth prospects for some sovereigns such as Singapore, Korea, Thailand and Vietnam
