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Asia-Pacific Sovereigns – Peer Review

Most APAC sovereigns are on Stable Outlook with only Vietnam on Positive and two on Negative – Bangladesh and the Maldives. APAC growth has remained resilient in 2023, despite the weaker-than-anticipated Chinese rebound and tighter external financing conditions. Inflation has fallen to more comfortable levels in many places, although El Niño is a risk, particularly for sovereigns that have food as a large weight in the CPI, such as India, the Philippines and Thailand.

This could lead to larger subsidy bills and delays in monetary easing if central banks expect second-round effects. FDI inflows into China have fallen sharply over recent quarters, which could be related to shifts in supply chains, but also cyclical factors as firms may be postponing investments amid subdued and uncertain global growth prospects. FDI inflows have picked up in Singapore and Malaysia, including the electronics sector, while the rise in India is mostly geared towards services.

Slow Progress on Fiscal Consolidation Fiscal deficit reduction has been relatively modest in most places this year, despite resilient growth, as governments balance their consolidation goals with economic growth aims. Consolidation in sovereigns that had the widest deficits in 2022 tends to be small relative to the broader regional trend. Limited fiscal headroom could leave some credit profiles vulnerable to future shocks.

Source : Fitch Rating