Generally strong Asia-Pacific economic growth should support the performance of business sectors in the region this year, but headwinds could pose a challenge, Fitch Ratings said.
"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," Fitch Ratings Senior Director Duncan Innes-Ker said.
The Philippines, India, Indonesia, and Vietnam are expected to post above five percent growth this year, the debt watcher said.
China's performance, meanwhile, "will still be strong by most other countries' standards."
The outlook for banks in emerging markets was set at "improving" — particularly for those in India and Indonesia — compared to the "neutral" for 2023, while that for technology for the entire region was set at "neutral" — up from 2023's "deteriorating" on expectations of a recovery from last year's downturn.
The transportation sector, particularly airports, should still benefit from remaining pent-up demand following the lifting of Covid-19 travel restrictions, but Fitch said growth was likely to fade in the second half of 2024, resulting in an outlook of "neutral" compared to last year's "improving."
"Deteriorating" outlooks were concentrated in China, Australia, and New Zealand due to factors such as Beijing policy responses and worsening asset quality in the latter two markets.
Geopolitical risks will continue to pose risks, and while tensions between China and the United States may have eased, companies across the region are expected to further diversify their supply chains.
"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," Fitch said.
Many economies in the region remain vulnerable to shocks, the debt watcher also said, with debt ratios of "about half" of rated APAC sovereigns likely to rise due to high borrowing costs and "mostly modest fiscal deficit reduction plans."
Aggregate earnings before interest, tax, depreciation, and amortization (Ebitda) margins for APAC corporates, meanwhile, are expected to recover to around 14 percent following three years of declines.
"The natural resources and oil and gas sectors will be the exceptions, recording narrowing margins, as several commodity prices fall from recent high levels," Fitch said.
Source: Manila Times