Thursday Nov 27, 2025
Thursday Nov 27, 2025
Thursday, 27 November 2025 05:47 - - {{hitsCtrl.values.hits}}
|
Protests in Nepal
|
Fitch Ratings said political flare-ups will remain a credit risk for some APAC emerging market sovereigns in 2026, following significant political unrest this year in Indonesia, the Maldives, Mongolia, Nepal and the Philippines.
The effect of major social unrest on near-term economic activity is usually negative as the instability tends to hurt consumer and business confidence, and external balances can be affected if inflows of tourists, remittances or investment are hit, or if capital outflows increase. Such effects can be modest if stability returns swiftly and confidence is restored, but sustained political tensions can be a significant drag on economic performance.
The effect of subdued economic performance on public finances can increase if Governments respond to unrest by loosening fiscal policy. There can also be a negative influence on budgetary performance, as well as other sovereign credit metrics, if social tensions persist over time, prolonging political uncertainty.
The impact of political instability can be amplified if unrest leads to the fall of Governments or significant changes to governance standards or established institutions. Such circumstances generally increase the risk of major changes in policy that can affect sovereign credit metrics.
The resilience of a sovereign’s ratings to major bouts of unrest will depend on its credit buffers. Those with lower debt or larger fiscal and external buffers will be more able to withstand the adverse effects of temporary disruption.
“Our affirmation of Nepal’s ‘BB-’ rating in November 2025, for example, partly reflects our view that the country’s strong external liquidity, and modest and highly concessional government and external debt burdens will help to contain the impact of the September protests and change of government on the sovereign’s creditworthiness,” Fitch said.
