Political unrest sparked by public discontent over corruption, cost of living pressures and a perceived lack of economic opportunities for young people poses a risk to the economic and fiscal performance of several Asian countries, Fitch Ratings warned Tuesday.
The credit rating agency anticipates that domestic political pressures, including potentially violent protests by younger generations (Gen Z), may flare up again in 2026, following similar incidents in 2025. These pressures have already led to the removal of the entire political elite in Nepal and cabinet changes in Indonesia, Mongolia and the Philippines.
Fitch said that bouts of political unrest have the potential to weigh on sovereign economic and fiscal performance and influence governance standards and institutions.
The impact on sovereign ratings will depend on a country’s credit profile buffers and policy responses to incidents of unrest. Fitch maintains a credit rating of BBB with a stable outlook for the Philippines.
Overall, Fitch expects most Asia Pacific countries to remain resilient despite subdued global demand, although some export-oriented economies may see modestly lower GDP growth.
The agency noted that US tariff-related uncertainty is gradually abating and some Asian economies will still benefit from the strong global AI capital expenditure (capex) cycle.
Continued weakness of the US dollar and the ability of some central banks to cut interest rates amid low inflation are expected to mitigate the impact of weaker non-tech exports, it said.
Several sovereigns, particularly those that are investment-grade, boast relatively strong external accounts with comfortable foreign-exchange liquidity cushions.
Policy responses to weaker prospects for non-tech exports and subdued domestic activity in several jurisdictions will be crucial in determining the impact on sovereign credit profiles, it said.
Some governments, including those in Indonesia, South Korea, the Philippines and Thailand, have already increased spending to reduce public discontent and support households facing weaker growth prospects and the rising cost of living.
Recent violent protests in countries like Nepal and Indonesia could increase this spending pressure further, it said.
While deep domestic capital markets help finance fiscal deficits for some nations, Fitch said that the region’s fiscal consolidation is likely to remain weak.
The median government debt-to-GDP ratio for the region is expected to rise to 50.1 percent in 2026 from 49.1 percent in 2025 and 46.8 percent in 2024. More than a quarter of sovereigns are projected to see increases of more than 2 percentage points of GDP in their debt ratios in 2026.
China’s rating was downgraded to ‘A’ from ‘A+’ in April 2025, reflecting Fitch’s expectation of continued weakening of its public finances as sustained fiscal stimulus is deployed to support growth amid subdued domestic demand and weak price pressures.
Most APAC sovereigns have a stable outlook, suggesting some headroom in their ratings to cope with the impact of weaker trade prospects.
Thailand is the only country on a negative outlook, with the September 2025 revision from stable reflecting growing risks to its fiscal metrics from prolonged political uncertainty and growth headwinds, including a delayed tourism recovery and household deleveraging.
