KUALA LUMPUR: Economic growth in Asia Pacific (APAC) will generally remain strong in 2024, especially in emerging markets (EMs), supporting sector outlooks across the region.
Fitch Ratings expects real gross domestic product (GDP) to expand by or above 5.0 per cent in India, Indonesia, the Philippines and Vietnam, and China's performance will still be strong by most other countries' standards.
"Robust regional economic growth – particularly in Asia's large emerging markets - should offset headwinds from slowing growth in China, weak global demand and high interest rates, helping to support performance across sectors in APAC in 2024," said its senior director Duncan Innes-Ker.
According to Fitch Rating, growth in APAC EMs should buoy loan demand and limit the potential adverse effects on asset quality from interest rates, which we believe have largely peaked across the region.
The rating agency said the peaking of the rate cycle will affect APAC developed markets' (DM) banking sectors more than those in EMs.
"We expect net interest margins (NIMs) and non-performing loan ratios to come under pressure in DMs in 2024, but the degree of weakening will generally be modest," it said.
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.
It also said Sino-US tensions had eased recently, but 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, and may also influence investment and growth prospects for some sovereigns such as Singapore, Korea, Thailand and Vietnam," it added.