Asia Country Risk Ratings

Afghanistan (AFG)

Overall risk in Afghanistan remains very high as the Taliban continue to control the country after they recaptured Kabul in 2021. Political violence and political interference remain very high. Afghanistan remains heavily sanctioned by the West while a series of controversial policies have led to cuts to international aid and support, despite efforts from Kabul to engage more with regional partners to boost domestic investment. For instance, despite, no country formally recognising the Taliban government, they do claim to have diplomats in up to 12 countries including China and Russia. Since 2021, there has been a rise in the presence of Jihadist groups operating in Afghanistan and elsewhere such as on the border with Pakistan. Relations with Pakistan have become increasingly tense after Pakistan expelled more than 80,000 Afghans since the end of March after claiming that Islamist militants who have been responsible for attacks in Pakistan have safe havens in Afghanistan, a claim that Kabul deny. In recent months’ forces from both sides of the border have also clashed.  The cuts to international aid have proved significant and led to the World Health Organization (WHO) saying that they are concerned about the cuts to funding likely resulting in the forced closure of 80% of WHO-supported vital healthcare services in the country. After 2021, Afghanistan have lost access to the international banking system after their central bank assets were frozen. Poverty remains high with disruption impacting public services and confidence domestically as well as internationally. The risk of doing business is thus very high. Over the past few years, many people have been displaced. The agricultural sector will remain key and a dependency for the Afghan economy, however it comes with a growing climate risk as after significantly flooding last year, a significant earthquake stuck on the border with Tajikistan in April. Thus, import reliance will keep the trade deficit large as longer-term structural reforms are seen to be required to boost living standards. Supply chain disruption remains very high while exchange transfer risk 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 a trade truce and lower tariffs following April penal tariffs on goods.  Nevertheless, a trade deal may not be seen before 2026, as China’s aim is to revamp the Phase 1 trade deal from 2020 and the U.S. wants a phase 2 trade deal including penalties if targets are missed. The other main focus in 2025 is the economy where an extra Yuan2.5trn fiscal spending has been announced in March and more is likely by the summer as the economy slows with exports hit by U.S. tariffs. 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’s desire to take Gaza/Greenland or solve the Ukraine war. 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 an ongoing 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 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.

Georgia (GEO)

Overall risk in Georgia remains at a medium level. Georgia remains in a political crisis after the fall out of October 2024’s elections. The Georgian Dream Party won the election, having won 54% of the vote, however major concerns were raised when exit polls by opposition TV channels showed that four opposition parties had won. Irakli Kobakhidze is Prime Minister, and now Mikheil Kavelashvili is President after being nominated by parliament. He takes over from Salome Zourabichvili who refused to leave office in opposition to the ‘’unfair’’ election. After being granted EU accession in 2023, the Georgian Dream Party have halted EU accession until at least the end of 2028, a decision being seen as a move closer to Russia. This has caused extreme division in the country and violent protests, resulting in weeks of opposition clashes with police and arrests as the PM fears opponents overthrowing the government. Ex-President Zourabichvili is leading the opposition movement as they demand new fair elections. The leader of the main opposition party was detained by police in December; police have raided apartments of opponents funding the anti-government movement, while other critics to the government have also been arrested. Political violence is medium high and political interference is medium. The IMF forecast 6% growth in 2025 and 5% growth in 2026. The economy will maintain resilience despite the division and impacts of the unrest impacting business and consumer confidence. Tourism hit record highs in 2024 and easing central bank policy has boosted credit growth which has supported strong consumption. In addition, inflation is now consistently getting close the central bank’s 3% target but will pick up again after low price increases seen in recent years after 2022’s 11.9% peak. 3.6% inflation is projected for 2025 and 3.2% for 2026, according to the IMF, supported by a stronger Georgian Lari. The current account will remain in a big deficit this year at -4.4% of GDP as Russia remittance slow down and exports fall, while FDI increases from the likes of the Netherlands and the UK has been growing in recent years. The government debt to GDP will remain stable after improvements in revenue collection, growth and fiscal reforms. Government debt to GDP will hit 35.8% of the economy in 2025, according to the IMF, as the inability of the government to provide fiscal stimulus is now at a medium level. However, all now exists with a more fragile background now given the ongoing political unrest. The risk of doing business and banking sector vulnerability are both medium low.

India (IND)

India’s political and geopolitical landscape in early 2025 has proven both resilient and fraught with new complexities. On the domestic political front, prime minister Narendra Modi-led Bharatiya Janata Party (BJP) continues to face the intricate task of coalition management—a dynamic that has introduced new political uncertainties. The need to accommodate regional allies such as the Janata Dal (United) and the Telugu Desam Party has already constrained the government’s legislative agenda. Fiscal concessions and ministerial allocations were key bargaining chips in securing the alliance, but they have also complicated prospects for structural reforms in politically sensitive areas such as land acquisition and labour markets. This marks a shift from the more centralised policymaking of Modi’s previous terms.

Domestically, the political climate has grown more combative. Relations between the BJP and the opposition Congress party deteriorated sharply during the winter parliamentary session, which was marred by confrontational tactics and attempts by opposition leaders to unseat the Vice President. The filing of an FIR against Congress leader Rahul Gandhi further deepened the partisan divide, suggesting that political acrimony may overshadow legislative cooperation in the near term. State-level developments added further layers of volatility. The resignation of Manipur’s Chief Minister and the imposition of president’s rule in the state spotlighted ongoing ethnic tensions and persistent security challenges in parts of India’s northeast.

On the geopolitical front, the return of Donald Trump to the U.S. presidency and intensifying U.S.-China trade tensions elevated the strategic importance of the Indo-Pacific, where India remains a pivotal player. However, regional security risks remain acute. A deadly terrorist attack in Jammu & Kashmir in April reignited hostilities with Pakistan, culminating in a brief military confrontation and a tense ceasefire in May. While the situation has since stabilised, the episode underscored the fragility of the region’s security environment.

Despite these challenges, India’s economic fundamentals have remained relatively strong. The country attracted increased foreign investment, aided by favourable global monetary conditions. Yet rising policy uncertainty and regional tensions have prompted caution but India’s overall risk assessment level remains moderate for now.

Indonesia (IDN)

Indonesia entered 2025 navigating a turbulent political and geopolitical environment, as domestic unrest, contentious policy shifts, and evolving global dynamics placed mounting pressure on the country’s democratic institutions and economic stability. The first half of the year has underscored both the fragility and resilience of Southeast Asia’s largest democracy under its new leadership. The year began under the newly inaugurated administration of President Prabowo Subianto, whose contested ascent in 2024 had already stirred considerable controversy. A former general with a history of alleged human rights abuses, Prabowo’s presidency is closely tied to outgoing President Joko Widodo, with Widodo’s eldest son, Gibran Rakabuming Raka, installed as vice-president. This consolidation of power among entrenched political elites has fuelled public concerns over democratic backsliding and perceived nepotism.

By February, mass protests erupted across the country under the banner Indonesia Gelap (“Dark Indonesia”). Sparked by a series of unpopular policies—including budget cuts to fund a free nutritious meal programme and efforts to expand military influence in civilian affairs—the demonstrations were led by student groups and civil society actors. The controversial revision of military law, seen as a potential revival of the military’s historical dual-function (dwifungsi) in governance, became a flashpoint for broader dissatisfaction. The protests gained momentum through March and April, further inflamed by controversy over Jokowi’s academic credentials and criticism of Indonesia’s muted response to the Gaza conflict. Together, these issues have strained the administration’s legitimacy and deepened public mistrust. Economically, Indonesia has faced growing headwinds. Capital outflows accelerated, while the rupiah depreciated against the dollar. Investor sentiment has been undermined by perceptions of fiscal populism, lack of policy transparency, and creeping authoritarian tendencies within the government. Further, in April, Indonesia implemented a revised set of mineral royalty rates aimed at capturing a larger share of the country’s resource revenues for the state. Successive governments have maintained that a greater portion of mineral earnings should benefit the public, and the current administration is now pursuing higher fiscal returns to help fund a range of key policy initiatives.

Externally, Indonesia’s geopolitical environment has grown increasingly complex. The return of Donald Trump to the U.S. presidency and heightened U.S.-China tensions, particularly around Taiwan, have sharpened strategic risks in the Indo-Pacific. Meanwhile, on the trade war front, Indonesia’s government is prepared to offer generous concessions to the US, with the aim of securing a deal that would see US tariffs on Indonesian imports stabilised at the baseline 10% level after the current 90-day pause expires. Despite heightened risks around the trade war and fiscal concerns, Indonesia’s overall political rating remains moderate.

Korea, Dem. People’s Rep.  (PRK)

North Korea’s overall risk level remains very high. Kim Jong Un remains the supreme leader of the country. Political violence, political interference and legal & regulatory risk remain very high. North Korea continues to improve their military system with multiple new weapons and has pledged to continue doing so. North Korea, is still a major ally of Russia and are supplying troops as well as arms in exchange for oil and technology transfers. However, North Korea has been suffering from food shortages, due to the UN’s sanctions over its weapons and several natural disasters that have also led to them deepening their agricultural ties with Russia. Meanwhile, the Trump administration has too many issues to look at North Korea directly for now, but Trump still claims a good relationship with Kim Jong Un.  In the coming years this could lead to new negotiations to freeze North Korea’s nuclear program. North Korea might also be willing to consider such an idea for recognition of North Korea as a nuclear power and U.S. financial support, though China, Russia and South Korea would be uncomfortable with this. Complete denuclearisation is unlikely to be agreed. Meanwhile, supply chain disruption remains high. Sovereign non-payment remains medium high and exchange transfer remains low. The risk of doing business remains very high in North Korea.

Macau (MAC)

Macau’s overall risk remains medium low. In October 2024, Sam Hou Fai was elected as the chief executive delegate of Macau, taking over Ho Lat-seng as leader. Sam Hou Fai won 394 out of the 398 ballots cast in the election in which citizens don’t have a say in the appointment of their chief executive delegate. Political interference is low while legal & regulatory risk remains medium low. Macau’s economy remains dominated by tourism and particularly the gambling industries. After a slowdown driven by the pandemic in recent years, the industry has begun to pick up once gain. It was reported that casino revenues hit 226.8 billion patacas in 2024 (around 28.35 billion USD) which was an increase of 23.9% from 2023, however they do remain below levels seen before the pandemic. The new chief executive has stressed the importance of Macau diversifying their economy in the long run as the casino industry accounts for around 80% of tax revenues. China’s President Xi Jinping attended Sam Hou Fai’s inauguration in December at which he urged Macau to diversify their economy beyond their world hub for gambling and align with Beijing’s national development strategies. President Xi’s visit also marked 25 years of Chinese rule over Macau. China are trying to bolster Macau’s diversification by looking to push forwards more international events- for instance seen by the National Basketball Association’s (NBA) new multi-year deal to host games at Sand China’s Venetian arena. Macau aim for the non-gaming industry to account for 60% of GDP by 2028 as Sam Hou Fai has warned that Macau risk a budget deficit if gambling revenues fall below 15 billion pacatas (1.88 billion USD) a month. The IMF forecast 3.6% growth this year with inflation remaining low at 0.9% in 2025. Macau also have a significant current account surplus anticipated to hit 30% of GDP in 2025. The impact of the trade war and tariffs between Washington and Beijing will likely have limited direct impact on Macau due to low trade between Macau and the US, however the risk of a China economic slowdown will have greater effect. The inability of the government to provide fiscal stimulus is low. The Macanese Pataca (MOP) is pegged to the Hong Kong Dollar at a rate of 1 HKD for 1.03 MOP with the HKD remaining pegged to the USD. Exchange transfer risk remains medium low while the risk of doing business remains low.

Malaysia (MYS)

Malaysia’s political climate in early 2025 showed notable signs of consolidation, as Prime Minister Anwar Ibrahim’s administration continued to deliver a period of stability following years of coalition turbulence and leadership turnover. Having assumed the ASEAN chairmanship in January, Anwar successfully leveraged Malaysia’s elevated diplomatic profile to reinforce his government’s domestic legitimacy and regional standing.

At home, Anwar’s Pakatan Harapan-led coalition maintained a working parliamentary majority, a welcome shift from the instability that plagued Malaysia’s politics from 2020 through 2022. This political steadiness allowed the government to focus on governance reforms and legislative priorities without immediate threats to its survival. In contrast to past years, no major coalition fractures or leadership challenges emerged in the first half of 2025—though Malaysia’s legacy of fractious coalition politics remains an underlying risk.

Anwar’s government sought to use this window of stability to consolidate public trust through an agenda focused on fiscal responsibility, social protections, and institutional reforms. Key measures such as minimum wage increases and data protection laws were not only economic in nature, but also designed to signal improved governance and responsiveness to public concerns—an important political priority after the volatility of recent years. While the political climate was calmer, Anwar still faced the challenge of managing a broad-based coalition and balancing competing interests within it. Internal tensions remain, particularly as the government prepares for upcoming state elections that could test coalition unity and public support.

For now, Anwar’s leadership has provided Malaysia with its most stable political footing in several years. Yet maintaining cohesion within the ruling alliance and delivering tangible reform progress will be critical in determining whether this political calm proves durable through the remainder of 2025.

Mongolia (MDG)

Overall risk in Mongolia remains medium. Ukhnaagiin Khürelsükh remains President ahead of 2027’s presidential elections. Legislative elections took place in 2024 in which his Mongolian People’s Party failed to win a majority, thus formed a coalition with Democratic Party and the National Labour Party, in the new reformed electoral system under proportional representation and with 50 more deputy positions in parliament. Political interference is medium while legal & regulatory risk is medium high. Mongolia have made significant progress in recent years in becoming an upper-middle income country while taking strides to reduce poverty. Mongolia are building closer ties with China and Russia, with China staying as by far their most important export market and Mongolia having become increasingly reliant on Russian oil and gas imports. Ties with Russia were further strengthened when Vladimir Putin visited Mongolia last year. However, despite pressure, Mongolia have yet to join the Shanghai Cooperation Organisation security bloc. As for the economy, the IMF forecast 6.0% real GDP growth in 2025 and 5.9% in 2026. Growth will primarily be supported by the mining sector with production to be boosted by the Oyu Tolgoi mine. Natural mineral potential is further boosting FDI interest with Mongolia reaching an agreement in late 2024 with France’s Orano Mining Group to build a 1.6 billion USD uranium mine. Support from China is continuing to improve infrastructure and transport links, seen through February’s announcement of an agreement with China over the construction of a new cross-border railway link. However, despite anticipated boosts in mining exports (particularly copper) the current account deficit will remain large at -11.1% of GDP this year, according the IMF. Explained by worsening terms of trade from lower coal prices and still weak transport links for exports. FDI is however growing at a record rate. Furthermore, inflation remains high in Mongolia with the IMF forecasting 9.5% inflation for 2025 as Mongolia continue to feel the shocks of the agricultural supply shock but also inflationary pressure will be felt from fiscal expansion such as the public sector wage and pension increases. Government debt to GDP is projected to reach 42.6% of the economy this year. Sovereign non-payment risk is medium low. However, despite economic progress continued concern remain over levels of poverty, inequality, corruption, youth unemployment and lack of diversification with over dependence on China and Russia’s fragile economies. The risk of doing business remains medium high.

Nepal (NPL)

Nepal’s political climate in the first half of 2025 remained mired in instability, as fragile coalition dynamics and leadership rivalries continued to dominate the domestic landscape. Prime Minister Pushpa Kamal Dahal ‘Prachanda’ retained power, but his government’s cohesion was under constant strain, reflecting the entrenched volatility that has characterised Nepali politics since the abolition of the monarchy in 2008. The ruling coalition—an uneasy alliance of communist factions and the Nepali Congress—struggled to maintain unity amid frequent policy disagreements and leadership tensions. Prominent figures such as Prachanda, K.P. Sharma Oli, and Sher Bahadur Deuba continued to exert disproportionate influence, with shifting alliances keeping the government in a state of flux. While speculation over possible early elections persisted, most observers believe the current parliament would run its full term through 2027, as key parties sought to avoid triggering fresh political uncertainty.

This persistent instability has severely hampered effective governance. Chronic power struggles and weak policy continuity have delayed crucial reforms, undermined investor confidence, and limited progress on addressing unemployment and outward migration. Public dissatisfaction with the political status quo remains high, as citizens grow increasingly frustrated with the cycle of government turnover and political infighting. While large-scale unrest appears unlikely in the near term, the risk of renewed instability cannot be ruled out should economic conditions deteriorate.

Overall, the first half of 2025 saw Nepal’s political landscape defined by fragile coalition management and governance paralysis. Without greater political consensus and institutional reform, the country’s path toward stable governance and sustainable development will remain uncertain and consequently, overall rating remains moderate-high.

Papua New Guinea (PNG)

Papua New Guinea’s overall risk remains medium high. James Marape remains Prime Minister as he has done since 2019, despite being under pressure and surviving another vote of no confidence in April. Political violence is medium high while political interference and legal & regulatory risk both remain high. The threat of tribal violence remains after last year’s fatal clash which killed at least 20 in the dispute over the Porgera gold mine which gave police emergency powers. Meanwhile, relations with Australia will strengthen as the two side are currently in talks to extend their already strong defence cooperation agreement by discussing the possibility of a full defence treaty as China look to gain influence in the region. In addition, another significant risk remains the climate threat for PNG. After last year’s landslide which said to have buried 670 people and 150 houses, a series of earthquakes have already hit the country in 2025. Supply chain disruption remains medium high with the agricultural sector crucial for the economy in terms of food security and exports. The IMF forecast 4.6% growth this year. Strong export performance in the liquefied natural gas (LNG) and gold mining industries will support growth as the current account surplus and is estimated at 10.7% of GDP in 2025, according to the IMF. Production should pick up again at the Porgera mining site after last year’s violence and the mine’s temporary shutdown. Inflation will pick up this year after prices rose by just 0.6% in 2024. The IMF project 5.5% inflation this year with rising food prices and supply pressures. PNG have reached an agreement with the IMF over 265 million USD worth of support to allow for infrastructure development and support PNG’s transition in becoming more climate resilient. The risk of doing business remains high due to security concerns, high costs of doing business, persistent power outages and climate risks. Government debt is on a more positive trajectory as macroeconomic reforms and better revenue collection has allowed for progress in reducing the fiscal deficit. Government debt is expected to fall to 52% of GDP in 2025 and then further to 50.2% of GDP in 2026. Exchange transfer and sovereign non-payment risk remain medium high. However, poverty levels remain elevated and the infrastructure gap keeping many jobs unproductive, but the ‘’Connect PNG’’ will aim to transform roads, transport and connectivity in the country. 

Sri Lanka (LKA)

Sri Lanka’s political climate in early 2025 entered a rare phase of stability and renewed policy clarity, following years of economic crisis and political turmoil. The decisive twin electoral victories of the left-leaning National People’s Power (NPP) alliance in late 2024 fundamentally reshaped the political landscape. Anura Kumara Dissanayake’s election to the presidency in September, followed by the NPP’s commanding two-thirds majority in November’s parliamentary polls, ended a prolonged era of fragmented coalition politics and policy paralysis.

The NPP’s electoral mandate was widely interpreted as a public call for reform. President Dissanayake’s administration has since prioritised anti-corruption initiatives, more equitable economic policies, and long-promised human rights reforms, including a pledge to repeal the controversial Prevention of Terrorism Act. The absence of imminent electoral pressures in Q1 and Q2-2025 created a conducive environment for policy continuity and institutional rebuilding. The government’s consolidation of authority enabled steady progress on the IMF-backed reform agenda and external debt restructuring—moves that restored market confidence. Yet the political honeymoon is not without challenges: poverty and social vulnerabilities remain elevated in the wake of the 2022 crisis, and human rights concerns—particularly regarding accountability for past abuses—continue to draw scrutiny under an active UN monitoring mandate.

Public expectations for reform are high, and while the government enjoys broad parliamentary support, it faces the test of translating political stability into sustained institutional reform and tangible improvements in citizens’ lives. Geopolitically, Sri Lanka navigates a challenging external environment, including new U.S. tariffs and ongoing global economic uncertainties. In sum, Q2 of 2025 marked a pivotal phase in Sri Lanka’s political recovery—defined by consolidated leadership, reform momentum, and cautious public optimism. Maintaining this trajectory amid lingering social and governance challenges will remain the central political test for the NPP government. For now, though, while Sri Lanka’s economy appears to be on the right track, the risks of political upheaval remain tilted to the higher side and its overall rating remains moderate-high.

Taiwan (TWN)

Taiwan’s overall country risk score of medium-low reflects economic strength and only high rather than acute tensions with China over reunification. One key near-term uncertainty is Taiwan’s relationship with the new Trump administration, with Taiwan promising large orders for U.S. LNG and military hardware plus increasing advanced semiconductor production in the U.S. The Taiwanese Dollar (TWD) has also been under upward pressure, as domestic investors fear that the U.S. wants TWD appreciation as part of any trade deal.  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 now seeing pressure to dump KMT MP’s and counterpressure by the KMT for an early parliamentary election and pressure on the DPP President Lai.  China is also annoyed by Lai attempts to stop China infiltration and in response has intensified military exercises as part of China’s gray warfare. However, we feel that President Xi is unlikely to agree an invasion in the coming years, both as the military build up to 2027 continues and the high risk of failure if the U.S. gets involved – the U.S. enjoy clear superiority in submarine capabilities (aircraft carrier superiority could be counted by China large ballistic missile stocks).  Thus, China will likely continue to pressure Taiwan but stop short of major escalation. Elsewhere, structural economic indicators remain strongly 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 political landscape in the first half of 2025 was marked by deepening institutional volatility and elite-driven recalibration, following the dissolution of the reformist Move Forward Party and the ouster of Prime Minister Srettha Thavisin in late 2024. The Constitutional Court’s decisions, including a 10-year political ban on Move Forward’s leadership, effectively eliminated the main opposition force advocating royal reform—a move widely seen as a setback for democratic progress and a source of heightened political uncertainty.

Srettha’s removal cleared the way for Paetongtarn Shinawatra, daughter of former Prime Minister Thaksin Shinawatra, to assume the premiership. Her rise has restored the Shinawatra family to the centre of Thai politics, though it has also deepened existing political divisions. A no-confidence vote against Paetongtarn on March 26th tested her government’s cohesion, with opposition parties levelling accusations of mismanagement, corruption, and undue influence from Thaksin. Paetongtarn survived the motion comfortably, securing 319 of 488 votes, affirming the strength of her 11-party coalition.

However, underlying tensions within the coalition—particularly between the ruling Pheu Thai Party and its key partner, Bhumjaithai—remain unresolved. Public dissatisfaction is also rising amid persistent economic stagnation, high household debt, and cost-of-living pressures. Recent surveys show low approval ratings for Paetongtarn, reflecting broader disillusionment with the political status quo.

Thaksin’s return from exile in 2023 and his visible influence continue to fuel political controversy, with critics portraying Paetongtarn as his proxy. The military-aligned establishment retains significant leverage through the constitution and judicial institutions, underscoring the fragility of the current political settlement.

While Thailand continues to pursue pragmatic foreign investment and trade ties, domestic political instability and unresolved structural issues weigh heavily on its regional standing. The road to lasting stability remains uncertain, with elite power and public unease likely to persist through 2025. Consequently, Thailand’s overall political rating remains moderate to high, in our view.

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