Fitch Ratings has indicated that most sovereigns in the Asia-Pacific region are expected to maintain sufficient financial buffers in 2026 to withstand the impact of higher US tariffs and slower economic growth in China. Nevertheless, certain countries may encounter challenges due to weak domestic activity, ongoing geopolitical tensions, or the potential re-emergence of social unrest. These factors could lead to increased government spending or possible disruptions.
Reduced import demand from both the US—resulting from tariff increases—and China is anticipated to affect Asia’s non-tech exports in 2026. Despite this, some economies are likely to continue benefiting from robust trade in artificial intelligence (AI), although this growth is expected to moderate. Fitch forecasts that China’s economic growth will slow to 4.1% in 2026, down from 4.8% in 2025, citing continued weak price pressures, persistent challenges in the property sector, and modest consumer spending.
The agency projects improved fiscal balances in 2026 for approximately half of the region’s sovereigns, though overall fiscal consolidation is expected to remain limited amid rising fiscal risks. Several governments have already implemented fiscal measures to support employment and households. As a result, Fitch anticipates that the median government debt-to-GDP ratio in the region will increase to 50.1% in 2026, up from 49.1% in 2025 and 46.8% in 2024. For more than a quarter of sovereigns, debt ratios are projected to rise by over two percentage points of GDP in 2026.
Geopolitical risks are expected to remain elevated in 2026. Additionally, domestic political pressures could resurface, following protests in several Asian countries in 2025 related to political corruption, cost of living issues, and concerns over limited economic opportunities for young people.
Most Asia-Pacific sovereigns are currently rated with a Stable Outlook heading into 2026, with the exception of Thailand, which is on a Negative Outlook due to increasing risks to its fiscal metrics stemming from ongoing political uncertainty and economic growth challenges. This outlook follows a downgrade of China’s rating in 2025, as well as upgrades for Pakistan and Uzbekistan.
The full report, “Asia-Pacific Sovereigns Outlook 2026,” is available at www.fitchratings.com.
