Global sovereign sector outlook neutral, US policy risks exist: Fitch

Uncertainty over post-election US policies and their impact, however, poses a risk to the outlook, it noted.

From the policy agenda of the next US administration, Fitch expects tax cuts, a marked increase in tariffs, particularly on China, and a slowdown in immigration, while foreign policy will become more unpredictable.

The impact of tariffs will depend on their scale, coverage, pace of implementation and the extent of any retaliation, it said in a release.

There is a risk of a renewed pick-up in US inflation and rise in bond yields if there is fiscal loosening in the context of limited labour market spare capacity, lower immigration and increase in tariffs.

Potential higher US bond yields, appreciation of the US dollar and market volatility are a risk for emerging markets. US tariffs will add to China’s challenges, where we expect further policy stimulus as the authorities seek to boost growth and prevent deflation becoming entrenched, Fitch said.

Public finances will remain under pressure in 2025 from rising interest costs, demographic trends, defence spending, industrial policies, and social pressures, particularly in developed markets. Fitch expects median government debt to gross domestic product ratio to increase to 56.5 per cent at the end-2025 from 55.4 per cent at of the year.

Geopolitical risks will remain elevated next year given the wars in Ukraine and the Middle East, US-China strategic rivalry, rising protectionism, social discontent and potential flux in US foreign policy, Fitch added.

Fibre2Fashion News Desk (DS)