A SEVERE economic growth shock in China will affect the Philippines but not to as large a degree as in other Asia-Pacific (APAC) countries, a Fitch Ratings official said.

"The share of the Philippines' goods exports going to China is significant, at around 13 percent in 2022, so there would definitely be some hit through the export channel," Fitch Ratings Senior Director Duncan Innes-Ker told The Manila Times on Wednesday.

"However, this is still a lower degree of exposure than that faced by other APAC markets like Taiwan and Korea, or commodity exporters like Chile, Peru and Australia," he added.

An analysis by Fitch highlighted vulnerabilities in APAC markets strongly linked with China, including Vietnam, Korea, Taiwan, Hong Kong, Malaysia and Singapore.

Korea, Taiwan and Vietnam could experience real gross domestic product (GDP) growth that is 1.5 to 1.7 percentage points (ppt) slower in 2025 compared to baseline assumptions, while Singapore, Malaysia and Hong Kong may see a 1.0 to 1.5 ppt drop.

"Our analysis sees a relatively mild impact on the Philippines' economy in 2024 under the China growth shock scenario, but real GDP growth in 2025 would be around 0.4 ppt slower than under our baseline assumptions," Innes-Ker said.

"It is important to note that we do not factor in potential fiscal responses by the authorities in the Philippines, which might mitigate the impact," he added.

Middle Eastern energy exporters like Bahrain, Kuwait, Iraq, Qatar and Oman, meanwhile, will also face a significant downturn in real GDP growth.

Other commodity-producing countries dependent on Chinese demand such as Peru, Zambia, Chile, Australia and Indonesia will also be affected.

Developed markets outside APAC will be generally less affected, although some European countries like Germany, which has a significant export exposure to China, may see a decline of more than 0.5 ppt in real GDP growth.

"Economic growth is an important driver in Fitch's Sovereign Rating Model, affecting a range of structural, macroeconomic and public finance metrics," Innes-Ker noted.

"In most cases, a larger hit to growth is thus likely to correlate with more serious adverse effects on sovereign credit profiles and potentially on ratings," he added.

The impact on global demand resulting from a China shock will exert pressure on international commodity prices, especially metals and oil, with a lesser effect on food and gas prices.

Consequently, consumer price inflation is expected to decrease in most countries worldwide over 2024-2025.