Fitch Ratings Analysis on Asia-Pacific Economies
Resilience to US Tariffs and Chinese Economic Slowdown
Fitch Ratings indicates that most Asia-Pacific countries are likely to maintain resilience against increased US tariffs and China's economic deceleration.
- US Tariffs Impact: While uncertainty from US tariffs is diminishing, risks remain for potential re-escalation in trade and geopolitical tensions, despite recent US-China trade deals.
- India's Position: India stands out with a 50% extra US tariff due to the lack of a trade deal with Washington.
Economic Mitigation Factors
- Dollar Weakness: The persistent weakness of the dollar and the ability of central banks to cut policy rates amid low inflation will help mitigate the effects of weaker non-tech exports.
- External Accounts: Countries with investment-grade ratings have strong external accounts and robust foreign-exchange liquidity.
Fiscal Discipline and Consolidation
Fitch Ratings suggests weak fiscal consolidation in the Asia-Pacific region, with domestic capital markets aiding in financing fiscal deficits.
- Future Outlook: Fiscal consolidation is expected to progress slowly until 2026, with more than 70% of countries maintaining higher fiscal deficits than in 2019.
- Interest Expenditure: Elevated interest expenditure to revenue ratios are expected to decline by 2026 for only one-third of Asia-Pacific sovereigns.
