Asia Pacific growth to remain strong in 2024, says leading analyst
Economic growth in the Asia-Pacific (APAC) region will remain strong in 2024, with GDP expected to grow by about 5% in India and a host of emerging market countries, according to Fitch Ratings.
In its new ‘APAC Cross-Sector Outlook 2024’ report, Fitch said the outlook for the banking sectors in India and Indonesia, as well as APAC emerging markets as a whole, was set to improve in 2024, partly reflecting the robust economic backdrop.
“Economic growth in APAC will generally remain strong in 2024, especially in emerging markets, supporting sector outlooks across the region. We expect real GDP to expand by, or above, 5% in India, Indonesia, the Philippines and Vietnam, and China’s performance will still be strong by most other countries’ standards,” Fitch said.
The Indian economy grew 7.2% in 2022-23 fiscal year. India’s GDP expanded 7.8% and 7.6% in the June and September quarters, respectively.
Fitch said it expects India to be among the world’s fastest-growing large economies, with GDP growth of 6.9% in this fiscal period, followed by 6.5% in 2024-25.
Fitch Ratings Senior Director Duncan Innes-Ker said: “Robust regional economic growth, particularly in Asia’s large emerging markets, should offset headwinds from slowing growth in China, weak global demand and high interest rates, helping to support performance across sectors in APAC in 2024.”
Fitch said headwinds from slower Chinese growth, weak global demand and higher interest burdens following the rise in interest rates over 2022-23 will weigh on performance for many sectors. But the bulk of Fitch’s APAC sector outlooks for 2024 remain neutral.
Red Sea strife set to damage Indian export market
Threats to cargo vessels in the Red Sea may cost the country’s exporters $30 billion in the current fiscal year cost, analysts are predicting. The problem has already lead to a surge in container shipping rates, which may prompt exporters to hold back on shipments.
The initial assessment, conducted by the Research and Information System for Developing Countries, a New Delhi-based think tank, would mean a 6.7% drop in Indian exports, based on last fiscal year’s total of $451 billion.
“The crisis in the Red Sea would indeed impact India’s trade and may lead to further contraction,” said Sachin Chaturvedi, the director general of the think tank.
To date, the government has not released any official estimates on the impact of the Red Sea crisis on Indian exports.
The number of ships passing through the Suez Canal is down about 44% compared with the average for the first half of December, according to Clarkson Research Services Ltd, a unit of the world’s largest ship broker. Vessels with a combined tonnage of about 2.5 million gross tons passed through in the week to 3 January, compared with about 4 million tons at the start of last month, they said.
Yemen’s Iran-backed Houthi militants have targeted vessels transiting through the Red Sea with missiles in recent weeks. The Houthis say they are targeting vessels that have a connection with Israel.
For India, the Red Sea is a major route for shipping to Europe, the US East Coast, the Middle East and African countries. Prime Minister Narendra Modi’s government is in discussions with export promotion councils to find ways to protect trade transiting through the route, according to two officials familiar with the matter.
The threats have pushed Indian exporters to hold back around 25% of the outbound shipments transiting through the Red Sea, according to Ajay Sahai, director general of the Federation of Indian Export Organizations, which falls under India’s Trade Ministry.
India usually exports a variety of goods including petroleum products, cereals and chemicals using the Red Sea route. Exports in the current fiscal year are already flagging with a 6.5% contraction in the April to November period from a year ago, according to government data.
The Red Sea disruption could hit margins for India’s oil and auto sectors, creating higher global freight and insurance rates, said Madhavi Arora, a leading economist with Emkay Global Financial Services. But the bigger concern could be inflation, which has been above the central bank’s comfort zone of 4% since the end of 2019.
