Asia Country Risk Ratings

Cambodia (KHM)

Cambodia’s overall risk remains medium high. Hun Manet remains PM having won 2023’s elections and has strong control in Cambodia after his Cambodian People’s Party won 55 out of 58 in last year’s senate elections and 120 out of 125 seats in parliamentary elections months before with opposition parties banned from taking part. Political interference does remain high and legal & regulatory risk very high. Cambodia is aiming to put forward a more balanced approach to foreign policy in trying to engage more with the West, being a country, which has continued to have close ties with China for many years. There are fears by the West that some of Cambodia’s ports and naval bases are growing in Chinese influence having potentially significant security impacts. For instance, Washington is worried that the Ream Naval Base will become a Chinese outpost after China have heavily invested to expand the base. Thus, Cambodia have invited the US Navy to the base, once it has been completed. The US are generally worried about Chinese influence in Cambodia particularly off the back of lack of opposition in last year’s legislative elections. China is also playing a part in Cambodia’s Funan Techo Canal project which neighbours and the West fear may be occupied by Chinese naval vessels. The risk of doing thus remains very high. Solid economic growth forecast by the IMF of 5.8% for 2025 and 6.2% for 2026 and will be supported by the boost in the tourism industry, the continuation of construction projects such as the Funan Techo Canal project and the Siem-Reap International Airport as well as manufacturing exports. Tourism which represents around a quarter of GDP reached 94.8% of its pre pandemic level in 2024, which representing a significant improvement after decline in recent years. Inflation remains stable in Cambodia with 2.1% projected for 2025 with a rise to 3.2% for 2026. Since the pandemic there has been poverty reduction and improvements to healthcare and education. Government debt also remains sustainable with the IMF estimating it at 26.9% of GDP in 2025 and 26.6% of GDP for 2026 with cuts to capital expenditure remain part of the government’s fiscal consolidation plan. Sovereign non-payment risk remains medium. As for the current account after going into surplus in 2023, it is expected to move persistently back into a deficit of -3.6% of GDP in the next 2 years. Cambodia’s biggest export partner remains the US with 37.4% of exports going into the US, according to Trade Map and they continue to hold a significant trade surplus over the US. Therefore, Cambodia could suffer from any reciprocal tariffs implemented by President Trump and the impacts of any trade tensions which may develop. The Riel KHR remains pegged against the USD and Cambodia’s economy and private sector debt remains highly dollarized. Exchange transfer risk does remain medium low and banking sector vulnerability medium. In addition, with climate instability from the El Nino and La Nina weather phenomena and still an infrastructure gap needing to be filled supply chain disruption remains medium high. 

China (CHN)

China’s overall country risk score remains at medium, with the legal and regulatory risk remaining at medium high, and political interference at medium. Internationally, the key issue is U.S./China relations, with the U.S. imposing an extra 10% tariff on China and more modest targeted counter tariffs.  China’s aim is to get the U.S. to the negotiating table sooner rather than later and revamp the Phase 1 trade deal from 2020 rather than dealing with fentanyl alone. Negotiations will be tricky however, as the U.S. wants a phase 2 trade deal including penalties if targets are missed. This will likely ensure turbulence in trade relationships, though we eventually see a deal being struck in H2 2025.  The other main focus in 2025 is the economy where a Yuan3-5trn fiscal package is expected to be announced in the coming months to keep the economy close to 5% growth, despite the ongoing residential construction bust and signs that China’s consumer spending remains weak.  Meanwhile, a significant escalation with Taiwan remains unlikely in the next 1-2 years, as China waits to see if they can benefit from U.S. President Trump desire to take Gaza/Greenland or the Panama Canal. China military forces are also not strong enough yet for such a high-risk military operation, though China will keep up its gray warfare with Taiwan including large scale military exercises.  Elsewhere, the exchange transfer risk remains at medium-high. A current account surplus, plus substantial FX reserves, helps to support this rating (China is also engaged in a multi-year diversification from U.S. Treasuries, including into gold). The inability to provide fiscal stimulus remains at medium. China has room for extra fiscal stimulation should lower growth risk and a hard landing in 2025, while the dominance of domestic investors means that China’s authorities can persuade investors to rollover and buy new debt. Banking sector vulnerability also remains at a medium rating, despite worries about the long-term downturn in the residential property sector. Non-performing loans, primarily held by small and city banks, can be managed through potential takeovers by larger banks and local governments.

Hong Kong (HKG)

Overall risk remains medium low in Hong Kong as John Lee Ka-Chiu remains Hong Kong’s Chief Executive as he has done since 2022 further integrating Hong Kong closer to Beijing. Political interference and legal & regulatory risk are medium low. After the national security law (NSL) was introduced in 2020 and further security laws in 2024, giving away parts of Hong Kong’s autonomy to China, the US has become more sceptical of Hong Kong and as a result see China and Hong Kong as one. The law has undermined people’s right to protest and be critical of the regime. For instance, in November, 45 pro-democracy activists were sentenced for up to 10 years in prison. This is not the first time that pro-democracy campaigners have been sentenced in Hong Kong in challenging the governance and Beijing’s influence and control. In terms of the economy, 3% growth is forecast for 2025 and 2.9% for 2026 by the IMF. The risk of doing business remains low as Hong Kong remains a hub for international business with a low-tax environment with no capital gains or sales taxes, a free port and strong infrastructure. However, there is a fear that tax reforms may have to be implemented in the coming years as negative fiscal deficit have been recorded in 4 or the last 5 years. This is a worry for the long term fiscal strength of Hong Kong, despite still low overall levels of public debt projected at 11.3% of GDP for 2025 and 13% for 2026.  Sovereign non-payment risk is medium. Much of this budget deficit deterioration has been brought about by the property crisis in China and Hong Kong as real estate development and sales have slowed, a major source of income for Hong Kong as they have previously benefitted from high property prices due to the government’s monopoly on land supply. This comes as a major threat putting pressure on Hong Kong to raise revenue in other ways. However, more Chinese companies are likely to set up in Hong Kong with Hong Kong eyeing up USD20 billion of listings, benefitting from uncertainty in China, which will kick-start more life into Hong Kong’s economy after large sums of capital flows exited since COVID and the imposition of security acts. Further to this, with the US treating Hong Kong like China, Hong Kong is set to receive a 10% increase in tariffs from the US, a move which has prompted Hong Kong to report the US to the World Trade Organization (WTO). The Hong Kong dollar remains pegged to the USD, which has given the Hong Kong Monetary Authority (HKMA) limited scope to ease the policy rate still at 4.75% as they have been moving with the Federal Reserve. Exchange transfer risk is medium low, however banking sector vulnerability remains medium high.

India (IND)

India's political outlook for 2025 remains stable. The ruling National Democratic Alliance (NDA), led by the Bharatiya Janata Party (BJP) under Prime Minister Narendra Modi, secured a third consecutive term in the 2024 general elections. However, the NDA's narrow majority of 293 seats in the 543-member Lok Sabha has heightened its reliance on coalition partners, complicating legislative processes, particularly for business-oriented reforms like land and labour policies.

The opposition, led by the Indian National Congress under the Indian National Developmental Inclusive Alliance (INDIA), strengthened its parliamentary presence with 237 seats, primarily due to strong regional performances. This shift underscores the rising influence of regional leaders, creating new national contenders. However, internal hierarchy issues may hinder Congress's broader appeal. The narrow majority raises the risk of legislative gridlock, with the opposition poised to block significant portions of the government's agenda. However, strengthened political checks and balances may enhance institutional transparency and reduce risks associated with contentious social reforms. At the state level, BJP's performance will vary, with employment challenges potentially impacting election outcomes. The inability to amend the constitution will stall controversial policies like the Uniform Civil Code and National Register of Citizens, contributing to social stability. The BJP won a majority in New Delhi after nearly three decades in February 2025, underscoring the growing discontentment with the Congress and the Aam Aadmi Party. The elections were held in the aftermath of the budget announcement, which included several tax exemptions for the middle-income group. The budget changes will likely influence the BJP’s chances favourable in other state elections this year, particularly Bihar in Q3 2025. The upcoming Bihar state election in late 2025 will serve as a critical barometer for political sentiment, influencing both national and regional dynamics.

While low-grade terrorist threats from extremist organisations in Kashmir persist, they are unlikely to disrupt broader business activities. The government's strong security measures along sensitive borders will maintain stability.

Indonesia (IDN)

Indonesia's political landscape under President Prabowo Subianto presents a blend of stability and challenges as his administration aims to maintain a broad but loosely structured coalition to minimize internal conflict. While this approach will help preserve political stability, the reduced number of coalition parties compared to the previous administration increases the risk of policy gridlock in the House of People's Representatives (DPR). The exclusion of the Indonesian Democratic Party-Struggle (PDI-P) and the National Democratic Party (NasDem) from the cabinet has strengthened the opposition's influence, enhancing legislative checks and balances. Although Mr. Prabowo's coalition holds a majority with 348 out of 575 seats in the DPR, this is notably weaker than the previous government's 525-seat dominance, offering opposition parties greater leverage to obstruct government initiatives.

To maintain conservative support, Mr. Prabowo's cabinet features representatives from all major Islamic parties and organizations. The enduring influence of former president Joko Widodo (Jokowi) through his son and current Vice-President, Gibran Rakabuming Raka, also adds a layer of continuity to the administration. While Mr. Prabowo is expected to serve his full term, his government's effectiveness may be hindered by a bloated cabinet—expanded from 34 to 48 ministries—potentially leading to larger budgets, increased bureaucracy, and policy inconsistency.

Political stability has also been tested by ongoing public demonstrations. Following the "Dark Indonesia" protests in Q4 2024, where students and activists rallied against President Prabowo's budget cuts, discontent continued into 2025. Thousands of students, particularly in cities like Yogyakarta, voiced opposition to fiscal policies initiated in late 2024, underscoring widespread dissatisfaction with the administration's economic direction. These protests, alongside demonstrations against the 2024 Indonesian local election law, signal persistent public unrest and highlight the challenges the government faces in balancing political stability with responsive governance. More sporadic protests are like over the course of 2025 but these will not derail the government.

Myanmar (MMR)

Overall risk in Myanmar remains high as political and civil unrest persists. Civil war between the military-led junta ruling Myanmar and rebel groups continues to wreck the country, which broke out after 2021’s military coup and has intensified since late 2023. At present, the rebel groups are taking more and more of a foothold in the country as they continue to advance and gain ground, particularly along the Chinese border. In December, a rebel group announced that it had captured a significant military headquarters and a second regional command in the west along the Bangladesh border after weeks of fighting. This is significant as it’s the first time the military has lost control of its border. China is becoming increasingly concerned by the progress of the war over its border and as a result have helped mediate a ceasefire in the north between Myanmar’s military and rebel group MNDAA, after their 2024 ceasefire broke down. The ruling junta have extended a state of emergency for six months as they aim to push through their plans for an election this year to gain credibility and signs of support. There is though significant opposition to elections being held with political parties banned and fear of opponents significantly disrupting the process. Legal & regulatory risk remains very high. Economic progress has been halted by crisis after crisis in Myanmar with 1.1% and 1.3% growth forecast by the IMF in 2025 and 2026. The impacts of war have been devastating alongside an increasing climate threat. Typhoon Yagi and widespread floods have left agriculture in turmoil, leading to major shortages and food insecurity. Supply chain risk disruption is thus very high. 14.2% inflation for 2025 is projected after a 22% price increase last year. As a result of these crises, a third of the population are requiring humanitarian assistance. In addition, rebel attacks are leaving most of Myanmar with power shortages with blackouts becoming more frequent as critical infrastructure has been destroyed. And the relentless conflict and presence of rebel groups have led to the withdrawal of lots of foreign investors, leaving the need for investments from neighbours China and Thailand to fill the gap in energy and from China’s silk road project. An issue being further worsened in recent weeks after the new US administration’s decision to stop the USAID program. The US are Myanmar’s biggest single donor and this withdrawal is sparking widespread fear as a famine is materializing in the region. The risk of doing business remains high. A big public debt and current account deficit of 63.3% and -4.5% of GDP respectively are forecast by the IMF. This has caused a continued plummeting Myanmar kyat as sanctions on trade and assets from the West persist increasing the costs of essentials for households. However, with the UN estimating 3 million people displaced due to the conflict has led to a record level of inward remittances boosting foreign exchange reserves. Exchange transfer and sovereign non-payment risk are both medium high.

Philippines (PHL)

The political climate in the Philippines remains marked by a complex interplay of popular support, internal coalition tensions, and regional security challenges. Despite a slight dip in approval ratings, President Ferdinand "Bongbong" Marcos Jr. continues to enjoy relatively high popularity. His administration remains attuned to economic risks, focusing on measures such as cash handouts to low-income families and subsidies for essential goods to maintain public support ahead of the May 2025 midterm elections.

While formal political opposition remains weak, internal friction within the ruling coalition presents a more significant threat to stability. The rivalry between Mr. Marcos’s camp and that of his predecessor, Rodrigo Duterte, has intensified, exemplified by Vice-President Sara Duterte's removal from the National Security Council and the initiation of her impeachment in the Senate. However, this tension is unlikely to destabilize the president significantly, as our core forecast suggests.

In the southern Bangsamoro region, the security situation is improving but remains fragile. The peace process, boosted by the establishment of the Bangsamoro Autonomous Region in Muslim Mindanao in 2019, faces challenges such as potential election postponements and unresolved issues around disarmament and socioeconomic integration for former combatants. These could threaten stability and autonomy efforts.

On the reform front, significant changes to the political system appear unlikely. Mr. Marcos, rooted in a traditional northern political dynasty, is expected to maintain the status quo, prioritizing economic growth and infrastructure development over structural political reforms. The enduring influence of political dynasties and entrenched patronage networks continues to stifle progress on anti-corruption measures and institutional reforms.

Looking ahead to the midterm elections, the incumbent administration is well-positioned to retain power, with Mr. Marcos and his allies likely to maintain their majority despite fluid political allegiances.

Singapore (SGP)

Singapore's political stability is expected to remain robust, underpinned by the technocratic governance of the People's Action Party (PAP), which holds a parliamentary supermajority. The leadership transition in May 2024, with Lawrence Wong becoming prime minister and Gan Kim Yong being promoted to deputy prime minister alongside Heng Swee Keat, has reinforced policy continuity and stability.

The opposition, particularly the Workers' Party (WP), has made gains in recent elections by advocating for stronger checks on the government. However, the fragmented and small-scale nature of opposition parties prevents them from posing a serious challenge to the PAP's dominance. The WP remains a constructive opposition, operating within a framework where the PAP continues to steer the political landscape.

Singapore’s multi-ethnic society presents a minor risk to stability, but the government has implemented policies to enhance minority representation and socioeconomic status. Nonetheless, the ethnic Chinese majority is likely to remain the primary political force, with a non-Chinese prime minister being improbable in the near term. Strict media controls and limits on public demonstrations help mitigate the risk of racial tensions escalating into unrest.

The country will maintain its high standards of political and institutional effectiveness, bolstered by a competent bureaucracy, minimal corruption, and a strong legal system. While the state's involvement in the economy through government-linked companies may influence policy objectivity, improvements in governance are anticipated.

The next general election, expected in Q2-2025, is likely to see the PAP retain its parliamentary supermajority, despite potential gains for the WP. Key electoral issues will include the cost of living, housing affordability, healthcare, and inequality. Overall, Singapore's executive-led governance model will remain intact, ensuring a stable and predictable political environment.

Taiwan (TWN)

Taiwan’s overall country risk score of medium-low reflects economic strength and only high rather than severe tensions with China over reunification. The key near-term uncertainty is Taiwan’s relationship with the new Trump administration, which will likely require Taiwan placing large orders for U.S. military hardware and increasing advanced semiconductor production in the U.S.  Even so, President Trump’s aversion to war could see less commitment to helping defend Taiwan and one key question is whether China hawks in the administration will get Trump to keep the strategic ambiguity policy. The tensions in Taiwan parliament are also not helping, with a volatile passage of bills and a corruption scandal around the TPP leader. Meanwhile, China’s gray warfare has continued with military aircrafts intermittently flying close to Taiwan and occasionally large-scale China naval exercises.   However, the gray warfare has not escalated significantly compared to recent years. The domestic political landscape could also be a route to a more China-friendly view in some sections of Taiwanese society, which China would want to play out in the coming years and avoiding the alternative very high-risk strategy of invasion. Thus, China will likely continue to pressure Taiwan but stop short of major escalation. Elsewhere, structural economic indicators remain strong helped by a well-balanced economy, controlled inflation and a huge current account surplus. This leaves exchange transfer at a low rating, while the risk of doing business also remains at a low rating. Risk of sovereign non-payment is medium-low, which reflects the low government debt/GDP trajectory. 

Thailand (THA)

Thailand’s landscape remains fraught with challenges, and recent developments underline ongoing volatility. The Constitutional Court’s dismissal of Prime Minister Srettha Thavisin in August 2024, citing ethics violations, exemplifies the conservative establishment’s grip on power. Earlier in 2024, the reformist Move Forward Party was dissolved for proposing changes to the royal defamation law, blocking the party—despite winning the most seats in the 2023 election—from forming a government due to military-aligned Senate resistance.

A fragile truce has emerged between conservative factions and the Shinawatra family, with Thaksin Shinawatra, who returned from exile in 2023, influencing the Pheu Thai Party (PTP). His daughter, Paetongtarn Shinawatra, now Prime Minister, faces the daunting task of navigating economic uncertainties and maintaining political stability. However, scepticism prevails among the public, with many anticipating continued turmoil in 2025.

The contentious Memorandum of Understanding (MOU) with Cambodia over a disputed maritime zone heightened political risks. The opposition Phalang Pracharat Party (PPP) and nationalist groups argue that the agreement jeopardizes Thailand’s territorial claims and threatens to stoke anti-government sentiment. Additionally, intra-coalition tensions and the ongoing influence of military-aligned entities could impede government effectiveness.

While a military coup remains a low to moderate risk, the coalition's fragility and rising nationalist sentiment could shift this outlook. The local insurgency in southern Thailand poses minimal risk to broader stability, but overall, political uncertainty is likely to persist through 2025.

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