December 15, 2023
DHAKA – Bangladesh and the Maldives are the two countries in the Asia-Pacific region where the rating outlook is negative, said Fitch Ratings in the Asia-Pacific Sovereigns Outlook 2024.
It said the rating outlook distribution is slightly tilted for the APAC sovereign portfolio, with two negatives for Bangladesh and the Maldives, but most outlooks are stable.
In September, the US ratings agency assigned Bangladesh’s BB- rating but said the outlook was now negative rather than stable.
According to the report, the APAC region should remain resilient in 2024 to challenges from slowing global growth, high interest rates, and lingering property-sector issues in China.
“A gradual upturn in the global tech cycle and relatively robust domestic demand should support stronger GDP growth for APAC sovereigns compared with peers in other regions.”
External financing pressures should continue for some frontier markets, while uncertainty remains regarding the nature and timeline for Sri Lanka’s foreign-currency debt restructuring, it said.
According to Fitch, fiscal outlooks will vary, but high borrowing costs and mostly modest fiscal deficit reductions will cause debt ratios to rise in 2024 in about half of the APAC sovereigns despite solid growth rates.
“Many sovereigns in the region have lost fiscal headroom in recent years, making them more vulnerable to new external shocks.”
The ratings agency forecasts a rise in the government debt-to-GDP ratio during 2023-2025 for 40 percent of APAC sovereigns, and that government debt to GDP will be higher in 2025 than in 2019 for around 80 percent of the sovereigns.
Elections are scheduled in almost half of the rated APAC sovereigns portfolio, which may lead to slower reform momentum and some policy uncertainty, although Fitch generally does not anticipate major economic policy shifts.
“Geopolitics will likely continue to play an important role in APAC in 2024, such as for Korea and Taiwan. Sino-US tensions eased recently amid high-level meetings, but we expect relations to remain challenging.”
“Shifts in global manufacturing supply chains are becoming more apparent and may benefit some APAC sovereign credit profiles, but we believe changes will be gradual.”