Fitch Ratings-Hong Kong: Most sovereigns in the region should have sufficient buffers in 2026 to weather higher US tariffs and slower growth in China. However, several countries face weak domestic activity, geopolitical tensions or possible resurfacing of social unrest, which could lead to spending pressures or even disruption.
Dampened import demand from the US – following the tariff hikes – and China should affect Asia’s non-tech exports in 2026, while some economies should continue to benefit from strong trade in AI, even if this is likely to moderate. We expect China’s growth to slow to 4.1% from 4.8% in 2025, amid continued weak price pressures, a lingering property sector slump, and modest consumption.
We expect improved fiscal balances in 2026 for around half of APAC sovereigns, but consolidation should be modest in general, while fiscal risks have risen. Some governments have already announced fiscal measures in support of employment and households. As a result, we expect the median government debt/GDP ratio for the region to rise to 50.1% of GDP from 49.1% in 2025 and 46.8% in 2024, and increases by more than 2pp of GDP in 2026 for over a quarter of sovereigns.
Geopolitical risk is likely to remain heightened in 2026, while domestic political pressures could also flare up again, following protests in 2025 in several Asian countries against political corruption, cost of living pressures, and perceived lack of economic opportunities for the youth,
Most APAC sovereigns are on a Stable Outlook going into 2026, with only Thailand on Negative – reflecting growing risks to its fiscal metrics from prolonged political uncertainty as well as GDP growth headwinds. This follows a downgrade of China’s rating in 2025, and upgrades of Pakistan and Uzbekistan.
The report, “Asia-Pacific Sovereigns Outlook 2026’, can be found at www.fitchratings.comor by clicking on the link.