Finally, good news for Pakistan are coming as after Fitch, the International Monetary Fund (IMF) has also appreciated the caretaker government’s steps for the reviving country’s economy.
According to the Fitch report, the Asia-Pacific region is expected to maintain overall resilience in 2024 despite confronting various challenges, such as slowing global growth, heightened yields, geopolitical tensions, and persistent property-sector issues in China. GDP growth is anticipated to outpace that of peer regions for most APAC sovereigns.
Fitch forecasts growth below the peer median for only a few APAC sovereigns, specifically Japan, New Zealand, and Pakistan.
The growth outlook is reinforced by a gradual upswing in the global tech cycle and robust domestic demand in certain areas. While weak global growth may dampen demand for Asia’s electronics production and exports, some high-frequency data, notably from Singapore and Korea, suggest the initiation of an upward trend in the relatively short tech cycle. This positive trend is supported by advancements in technology, such as 5G and AI.
Elections are set for 2024 in almost half of Fitch’s rated portfolio of APAC sovereigns, creating some uncertainty, particularly in India, Indonesia, Korea, Pakistan, and Sri Lanka. The momentum of reforms has decelerated in the lead-up to elections, and the policy agendas of the incoming governments could impact credit profiles. However, policy continuity is expected to be the prevailing theme in most places.
The likelihood of election outcomes influencing credit profiles is considered higher in Pakistan and Sri Lanka, both of which will remain reliant on successful IMF program implementation and official support in the coming years.
Rating actions in 2023 primarily focused on frontier markets and included the downgrade of Pakistan to ‘CCC-‘ in February, followed by an upgrade to ‘CCC’ in July, both tied to changes in its external financing outlook
