KUALA LUMPUR: Fitch Ratings expects most Asia Pacific sovereigns to remain resilient to subdued global demand in 2026 despite modestly lower gross domestic product (GDP) growth for some export-oriented economies.
In a research note today, the rating agency said US tariff-related uncertainty is gradually abating, and some in Asia will still benefit from a strong global artificial intelligence (AI) capital expenditure cycle.
"Continued US dollar weakness and some central banks’ ability to cut rates amid low inflation will mitigate the impact of weaker non-tech exports, while several sovereigns - particularly investment-grade - have relatively strong external accounts with comfortable foreign-exchange liquidity cushions,” it added.
Fitch Ratings said it expects narrower deficits or larger budget surpluses in 2026 for half of Asia Pacific sovereigns but thinks consolidation will generally be modest, while fiscal risks have risen.
Some governments have already announced fiscal measures to support employment and households facing weaker growth prospects such as Indonesia, South Korea, the Philippines and Thailand.
"This may impede fiscal consolidation prospects and lead to weaker public debt trajectories.
"We expect the median government debt/GDP ratio for the region to rise to 50.1 per cent of GDP in 2026 from 49.1 per cent in 2025 and 46.8 per cent in 2024, and increase by more than two percentage points of GDP in 2026 for over a quarter of sovereigns,” it said. - Bernama
