Despite entering 2026 with generally strong buffers, Asia-Pacific economies are expected to face increasing pressures from slowing Chinese growth, U.S. tariffs, and heightened geopolitical tensions, according to Fitch Ratings. These factors are set to weigh on the region’s trade and debt dynamics, ushering in a more fragile year marked by rising public debt and elevated protest risks.
Fitch’s newly published Asia-Pacific Sovereigns Outlook 2026 report highlights ongoing global trade tensions and the decelerating Chinese economy as the key drivers of new risks in the region.
Slower Chinese Growth Ahead
The report forecasts China’s economic growth to slow from 4.8% in 2025 to 4.1% in 2026. The persistent property sector crisis, weak domestic consumption and ongoing low inflationary pressures are cited as the main contributors to the slowdown.
Fitch expects a notable weakening particularly in non-technology exports, although AI-driven trade is projected to continue offering support—albeit at a decelerating pace.
Public Debt to Continue Rising
While roughly half of the countries in the region are expected to see some improvement in fiscal balances, budget consolidation will remain limited due to increased social support spending and employment incentives. As a result, public debt as a share of GDP across Asia-Pacific is forecast to rise from 46.8% in 2024 to 49.1% in 2025 and 50.1% in 2026.
Geopolitical Risks to Remain Elevated in 2026
The report stresses that geopolitical risks will stay high throughout 2026. Widespread protests seen in 2025—driven by rising living costs, corruption allegations and youth unemployment—could resurface across several Asian economies.
Most sovereign credit outlooks in the region remain “stable,” but Thailand’s outlook continues to be rated “negative” due to political uncertainty and weak growth prospects. The report also notes that China’s sovereign rating was downgraded in 2025, while Pakistan and Uzbekistan were among the countries receiving upgrades.
Source: Patronlar Dünyası/ Prepared by: İlayda Gök