APAC Fiscal Consolidation Stressed by External Headwinds 📉

• External Headwinds, primarily US tariffs on exports and weaker global demand, are impacting fiscal consolidation efforts across the Asia-Pacific (APAC), according to Fitch Ratings. • Growth Outlook: APAC growth is still forecast to remain higher than other regions, with some mitigation expected from US dollar weakness and central bank policy rate cuts. • Fiscal Pressure: Governments are increasing spending to support households amid the high cost of living (often signalling weak domestic activity). Spending pressure may also rise due to protests in countries like Nepal, Indonesia, and the Philippines. • Sovereign Outlooks: Most APAC sovereigns are on a Stable Outlook. Thailand is the key exception, receiving a Negative Outlook due to increased public finance risks from political uncertainty and growth headwinds. • YTD Rating Changes: • Upgrades: Pakistan (to 'B-' from 'CCC+') and Uzbekistan (to 'BB' from 'BB-'), reflecting progress in reform implementation and funding support. • Downgrade: China was downgraded in April (to 'A' from 'A+') due to expectations of continued weakening public finances and a rapidly rising public debt trajectory.