Fitch Ratings has revised its sector outlooks for APAC, Eastern Europe and Sub-Saharan Africa sovereign to ‘deteriorating’ from ‘neutral’ as credit risk rises.
Credit risk is increasing for emerging market (EM) issuers, the agency stated, citing US tariffs and slowing international demand as catalysing factors despite overall strength in the global economy and capital markets.
Fitch notes that foreign investor interest in EM grew following the US’s April 2025 tariff announcements as the US dollar weakened, but that international borrowing costs have remained high.
It added, “There is a risk liquidity conditions could tighten in H2 25 as global economic growth slows and the dollar appreciates against most EM currencies, but we expect policy rates in major EMs to trend lower or stay stable, providing support to refinancing conditions.”
Alongside these downgrades, Greater China has retained its sovereign outlook as ‘deteriorating’ and the Middle East and North Africa, and Latin America sovereign outlooks have remained ‘neutral’. These have been maintained in part due to low tariff-related exposure, Fitch said.
Across corporates, LatAm, EM EMEA and EM APAC all have flat revenue projections for the rest of the year, with the majority holding ‘neutral’ outlooks. Fitch expected EBITDA margins to remain resilient.
Banking outlooks dropped from ‘neutral’ to ‘deteriorating’ in Korea, Mexico, Taiwan and Thailand due to weak bank loan growth prospects, asset quality and profitability in light of changing US trade policies. Vietnam fell from ‘improving’ to ‘neutral’ in tandem.
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