The agency states that there is a greater likelihood of election results impacting credit profiles in Pakistan.
Fitch Ratings, an American credit rating agency, has stated that Pakistan will continue to rely on the successful implementation of the IMF program and official support for the next few years. The agency’s forecast report highlights the possibility of election outcomes impacting credit profiles, particularly in Pakistan and Sri Lanka, both of which receive funding from the IMF. Additionally, elections are scheduled in India, Sri Lanka, Indonesia, and Korea.
According to the forecast, Fitch Ratings believes that the influence of election outcomes on credit profiles is expected to be higher in Pakistan and Sri Lanka. These countries will continue to rely on the successful implementation of the IMF program and official support in the coming years. The report suggests that the momentum of reforms has slowed before the elections, and the policy agendas of future governments could impact credit profiles.
However, the agency anticipates that policy continuity will prevail in most cases. The report also mentions that the election period may introduce some uncertainty. Fitch Ratings states that the Asia-Pacific region is likely to demonstrate resilience in the face of various challenges in 2024, such as slowing global growth, geopolitical tensions, high yields, and lingering property-sector issues in China.
Moreover, the agency highlights that rating actions in 2023 mainly affected frontier markets, including a downgrade of Pakistan’s rating to ‘CCC-‘ in February, followed by an upgrade to ‘CCC’ in July, which was linked to changes in the country’s external financing outlook. Additionally, GDP growth in the Asia-Pacific sovereigns is projected to outperform their counterparts in other regions.
Fitch Ratings predicts that only a few Asia-Pacific (APAC) sovereigns, namely Japan, New Zealand, and Pakistan, will experience growth below the peer median. The agency highlights that growth will be supported by a gradual improvement in the global tech cycle and strong domestic demand in certain regions.
The report mentions that weak global growth may impact Asia’s electronics production and exports, but some high-frequency data from countries like Singapore and Korea indicate the start of an upward trend in the short tech cycle. This positive trend is aided by advancements in technologies like 5G and AI.
Fitch emphasizes that fiscal outlooks will vary among APAC sovereigns, but despite solid growth rates, high borrowing costs and modest fiscal deficit reductions will lead to increased debt ratios in about half of these countries in 2024.
The agency also notes that China is gradually facing challenges due to rising government debt ratios and significant contingent liabilities.
