Fitch expects Pakistan to be dependent on successful IMF programme implementation

ISLAMABAD: Fitch stated on Wednesday that elections are scheduled for 2024 in almost half of its rated portfolio of Asia Pacific (APAC) sovereigns and will lead to some uncertainty. In its report, Fitch said that the Asia-Pacific region should largely remain resilient in 2024 to the several challenges it will face, including slowing global growth, high yields, geopolitics and lingering property-sector issues in China. GDP growth will mostly be higher for APAC sovereigns than for their peers in other regions.

It forecast growth below the peer median for only a few APAC sovereigns, namely Japan, New Zealand and Pakistan.

- Growth should be supported by a gradual upturn in the global tech cycle and relatively robust domestic demand in some places. Weak global growth will likely weigh on demand for Asia’s electronics production and exports, but some high frequency data, for instance from Singapore and Korea, are pointing to the start of an upward trend in the generally short tech cycle, helped by technological developments, such as 5G and AI.

- 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. A rising government debt ratio combined with significant contingent liabilities, is gradually becoming more challenging for China.

- Elections are scheduled for 2024 in almost half of our rated portfolio of APAC sovereigns and will lead to some uncertainty, including in India, Indonesia, Korea, Pakistan and Sri Lanka. Reform momentum has slowed in the run-up to elections and the policy agendas of the next governments could affect credit profiles, but we generally expect policy continuity to be the main theme in most places. We view the chance of election outcomes influencing credit profiles as being higher in Pakistan and Sri Lanka, which both will remain dependent in the next few years on successful IMF programme implementation and official support.

- Rating actions in 2023 were mostly on frontier markets and included a downgrade of Pakistan to ‘CCC-’ in February and a subsequent upgrade to ‘CCC’ in July, both related to changes in its external financing outlook.