Asia Country Risk Ratings

Bangladesh (BGD)

Bangladesh has undergone a structural political reset following the February 2026 election that delivered the Bangladesh Nationalist Party (BNP) a two-thirds parliamentary supermajority. With 209 of 297 seats, the BNP now holds sufficient strength to amend the constitution unilaterally — a concentration of power not seen since the pre-2024 political upheaval that toppled the Awami League government. However, the electoral mandate is narrower than the headline suggests. A turnout of 59.44%, well below historical norms, reflects the absence of the banned Awami League and signals significant disenfranchisement among the former ruling party’s base. The Jamaat-e-Islami’s re-entry into formal politics, securing 68 seats after its ban was lifted, reintroduces an Islamist parliamentary counterweight despite longstanding militancy-linked allegations. Post-election violence, factional clashes and attacks on minority communities underscore a volatile transition environment. The most destabilizing episode of the quarter followed the assassination of anti-India activist Osman Hadi, which triggered widespread riots targeting media institutions, Awami-linked sites and Indian diplomatic facilities. Anti-India sentiment has become politically instrumentalized. The extradition question surrounding former Prime Minister Sheikh Hasina, now exiled in India and facing additional convictions in absentia, remains a critical bilateral flashpoint. We assess that Dhaka’s strategic tilt toward China as its principal infrastructure financier reflects both political calculation and strained relations with New Delhi. Simultaneously, sovereignty pressures are mounting from Myanmar’s instability. Renewed fighting risks fresh Rohingya inflows into already overstretched Cox’s Bazar camps, where funding shortfalls exacerbate humanitarian fragility. Bangladesh’s immediate political outlook is one of consolidated executive authority. Sporadic Islamist-led unrest, minority targeting and the geopolitical balancing between India and China will define the rest of 2026 risk environment.

Cambodia (KHM)

Overall risk remains unchanged at medium high in the Southeast Asian nation of Cambodia. Under the Cambodian People’s Party (CPP), Prime Minister Hun Manet maintains his position since succeeding his father in August 2023. Towards the end of 2025, weeks of violence across Thailand and Cambodian borders had finally come to a halt, as a second ceasefire is agreed and being implemented. It is estimated that at least 101 people had been killed, while over half a million Cambodian and Thai civilians have been displaced, and the ceasefire remains fragile. Political violence and legal & regulatory risk remain at medium high and very high, respectively. Political interference is assessed as medium high risk, as Cambodia’s bilateral trade agreement with the U.S., signed in October 2025, eliminates tariffs on all industrial and agricultural goods, while a reduced 19% tariff remains on imports from Cambodia to the U.S.

In terms of Cambodia’s economy, the IMF forecast a GDP growth of 4% in 2026 and 4.5% in 2027. In comparison with the country’s average pre pandemic growth of 8%, an economic slowdown is expected to continue throughout this year. Strong agriculture and garment exports, along with the recovery of the tourism industry, drove Cambodia’s growth over 2025. However, sustaining the IMF’s growth numbers into 2026 and 2027 will depend on the nation’s diversification in exports, public investment management and stimulation in productivity through reforms. In the meantime, the risk of doing business continues to be assessed at very high. Inflation is projected to ease to 1.8% in 2026, supporting this transition, alongside the central bank’s (NBC) continued use of a managed float exchange rate policy to control rising prices. In the light of this, a high level of dollarization remains in Cambodia, which has allowed exchange transfer risk to remain unchanged at medium low, however in the long term the Cambodian government and NBC aims to reduce high levels of dollarization and promote the use of the local Khmer Riel, KHR. Finally, sovereign non-payment risk remains medium, as the IMF forecast government debt to be 29.3% of GDP in 2026 and 30.1% in 2027.

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. One key focus is on the proposed April summit in China between President Xi and Trump, which could try to develop the trade truce into a trade framework deal. The U.S. is pushing for progress more than China, given the diversion of exports to other countries and China’s reluctance to commit to numerical annual goals. Xi will also likely raise Taiwan reunification, though on balance we expect the U.S. to maintain the strategic ambiguity policy. The other main focus going into 2026 is the economy, with the new 5-year plan placing emphasis on turning new technologies into production reality. While the 2026-31 plan also mentions the importance of households to economic resilience, it remains unlikely that the government will launch a major cyclical handout for China’s consumers. A small package for 2026 was announced in late December, suggesting that a further modest boost will be announced in March. Meanwhile, a significant escalation with Taiwan remains unlikely in the next 1-2 years. China’s military forces are not strong enough yet for such a high-risk military operation, while any U.S. involvement would increase the risks of failure dramatically. The investigation into the high-ranking General Zhang Youxia is also being interpreted as Xi consolidating power, rather than the replacement of a Taiwan dove. Even so, China will keep up its gray-zone 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. The inability to provide fiscal stimulus remains at medium. China has room for extra fiscal stimulation should lower growth raise the risk of a hard landing in 2026 or 2027, but if growth is 4.5-5.0% then stimulus will likely be modest. Banking sector vulnerability has remained at a medium rating, as 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)

Hong Kong, the Special Administrative Region of China, continues to be greatly influenced by mainland China’s central government, and its overall risk remains medium low. Chief Executive, John Lee, continues his five-year term in office following his appointment in 2022, and is expected to retain support from mainland China’s officials in the upcoming 2027 election. Political interference, political violence and legal & regulatory risk all remain unchanged at medium low. A 2025 Legislative Council election had taken place at the end of the year, following the deadly fire in Hong Kong’s Tai Po district that killed nearly 160 citizens. The voter turnout, once again, had been calculated to be a near-record-low at 31.9%, as many people were arrested over their encouragement to prevent others from voting. In addition, the recent sentencing of leading China critic Jimmy Lai to 20 years imprisonment occurred under the region’s national security laws. Lai’s sentence has drawn major international criticism from the U.S., Britain, EU and Japan, as the National Security Law (NSL), following its expansion in 2024, remains in force.

In terms of the Hong Kong economy, GDP growth is expected to keep positive momentum transitioning into 2026, with IMF forecasts indicating a 2.1% in 2026 and 2% in 2027. Total exports of goods increased by 15.5% in Q4, as strong global demand continued towards the end of 2025, especially for electronic AI related products, which Hong Kong officials have stated will be a core focus for development throughout 2026. On the other hand, geopolitical uncertainties and escalating U.S.-China tensions still remain. Beijing and Washington tensions have been driven by several issues, including tariffs, even though talks have been held between U.S. President Trump and President XI Jingping, resulting in an agreement to trim U.S. tariffs and pause controls on the exportations of rare earths from China. Despite the ongoing global uncertainty, Hong Kong’s business confidence has seen improvements moving into 2026. Therefore, the risk of doing business and supply chain disruption are both assessed to remain low. The Hong Kong Dollar (HKD) is pegged to the USD, meaning there is little room for the Hong Kong Monetary Authority (HKMA) to maneuver. Meanwhile, the IMF inflation forecast is to rise slightly in 2026 to 2.1 %. Exchange transfer risk remains medium low while sovereign non-payment risk is assessed as medium, despite the IMF estimating government debt to GDP to stay low at 14% in 2026 and 14.1% in 2027.

India (IND)

India’s political environment remains structurally stable, though increasingly shaped by coalition arithmetic rather than single-party dominance. The BJP-led National Democratic Alliance (NDA), returned to power in 2024 with a reduced majority, governs in its third term under Prime Minister Narendra Modi with greater reliance on regional partners. This has introduced negotiation into policymaking but has not materially weakened executive authority. The November 2025 Bihar assembly victory reinforced the NDA’s coalition depth and secured a key eastern anchor. However, Manipur’s descent into renewed ethnic unrest — culminating in the chief minister’s resignation and the imposition of President’s Rule — exposed governance fragility in sensitive border states. These episodes underscore the limits of central political control in peripheral regions, particularly where identity politics intersects with security considerations. Legislative risk is moderate rather than acute. A narrower majority raises the probability of delays to contentious structural reforms, including land acquisition and labor rationalization measures critical to India’s manufacturing expansion. However, executive-led initiatives such as trade negotiations, digital infrastructure rollout, renewable energy targets, and logistics modernization — continue largely unimpeded. Foreign investor sentiment remains underpinned by macroeconomic momentum and institutional continuity. Externally, cross-border tensions with Pakistan persist at a low-intensity level following the 2025 Kashmir attacks, while diplomatic friction with Bangladesh has risen over extradition demands and rising anti-India sentiment in Dhaka. These developments generate geopolitical noise but have not translated into systemic domestic instability. Overall, India combines competitive democracy with resilient institutions. Political contestation is visible, but regime stability and sovereign control remain intact. We think the principal risk lies not in volatility, but in incremental reform slowdown under coalition constraints.

Indonesia (IDN)

Indonesia is entering a period of managed but increasingly contested stability under President Prabowo Subianto. While he is likely to complete his term through 2029, his governance style and policy direction are generating sustained urban dissent. The 17+8 movement protests and subsequent Dark Indonesia student demonstrations reflect mounting concerns over authoritarian consolidation, economic insecurity and elite privilege. The administration’s response, framing dissent as treason, restricting digital mobilisation, and deploying force, signals a preference for coercive stability over consensus-building. Institutionally, several developments suggest democratic backsliding. Military appointments to civilian roles, signals from the new Finance Minister regarding central bank influence and the symbolic rehabilitation of former strongman Suharto have unsettled reform constituencies. Proposals to weaken direct regional elections and the militarisation of bureaucracy indicate gradual centralisation of authority. Economic grievances compound political unease. Real wages remain below 2019 levels despite substantial GDP expansion, while flagship programmes such as the school meal initiative have required cuts elsewhere, fuelling perceptions of policy misallocation. In Papua, separatist tensions escalated, with significant internal displacement amid renewed military operations. Severe natural disasters further tested state capacity in recent months. Indonesia’s risk profile is not one of imminent regime change, but of accumulating structural fragility. Urban protests are likely to recur through 2026, increasing compliance costs and investment caution. We assess that stability will be maintained in the near term, but at the cost of institutional erosion and rising medium-term political risk.

Myanmar (MMR)

Myanmar’s overall risk has remained at a very high rating. Five years after the military coup in February 2021, Myanmar’s Junta Min Aung Hlaing had confirmed the military backed Union Solidarity and Development Party’s (USDP) victory in the recent general election. Therefore, legal & regulatory risk remains unchanged at very high, as military Junta Chief Min Aung Hlaing plans to hold his absolute power following the nation’s election results. Political turmoil has hurt Myanmar’s development since the beginning of the military coup in 2021, sparking a violent civil war between many pro-democracy resistance groups – including the likes of the People’s Défense Forces (PDF) – and the Myanmar military (Tatmadaw). Approximately 3.6 mln people have been displaced, according to the UN, while military forces have begun to gain control of areas of strategic importance. Alongside the support of neighboring country China, which backed Myanmar’s 2025 – 2026 election, the Junta claimed to have regained control of the northern town of Kyaukme, amid fears that the military leader was losing ground to the opposing resistance groups. Political interference and political violence both remain high, as the prospect for peace continues to look improbable.

In terms of the economy, the IMF’s forecast of 3% GDP growth in both 2026 and 2027 indicate a potential rebound, despite the challenges of the ongoing civil war and political control throughout Myanmar. Shortages of gas supply and national power outages are set to reduce through 2026, following the return of liquefied natural gas (LNG) imports. Although, Myanmar’s agricultural sector is being pushed to increase its overall exports. Inflation is forecast to remain high in 2026 at 28%, with the IMF estimating that inflation will begin to fall thereafter. The risk of doing business ultimately remains high as potential growth appears fragile, while the government’s inability to provide stimulus remains at high. In addition, sovereign non-payment risk continues to be assessed as medium. Government debt to GDP is expected to retain its previous levels due to the IMF forecasting 63% in 2026, while external debt continues to be a significant portion of Myanmar’s total debt. China is claimed to be one of the main bilateral creditors.

Pakistan (PAK)

Pakistan continues to face an acute multi-front security and political crisis. Insurgency violence intensified sharply in Balochistan, where the Balochistan Liberation Army’s coordinated Operation Herof 2.0 marked one of the deadliest offensives in years, targeting state infrastructure across nine districts. Islamabad’s military response was expansive, yet separatist resilience underscores persistent territorial sovereignty challenges. Simultaneously, cross-border dynamics have deteriorated. February airstrikes on alleged Tehrik-i-Taliban Pakistan (TTP) and Islamic State Khorasan Province (ISKP) camps inside Afghanistan, justified by Islamabad as counter-terror operations, shattered a fragile October 2025 ceasefire and prompted Taliban accusations of sovereignty violations. Attacks by TTP and ISKP have surged, including a high-profile mosque bombing in Islamabad. We assess that the security environment remains fluid, with risks of retaliatory escalation along the Afghan frontier. Domestically, political contestation remains unresolved. Former Prime Minister Imran Khan’s imprisonment and 17-year Toshakhana-II sentence have not eroded his popularity. Pakistan Tehreek-e-Insaf (PTI) protests persist, occasionally paralyzing infrastructure and triggering violent clashes. The PML(N)-PPP coalition under Prime Minister Shehbaz Sharif governs with limited cohesion, constrained by IMF conditionality and internal distrust. The military continues to act as the ultimate arbiter, sustaining the coalition primarily to exclude Mr. Khan from power. The structural risk lies in institutional imbalance. The military’s expanded influence following 2025 India tensions raises the probability of further political intervention, though a formal coup remains a tail risk rather than a base case. Combined with insurgency escalation and fiscal austerity pressures, Pakistan’s stability outlook remains fragile, with episodic unrest and sovereignty tensions likely to persist through 2026. Following these dynamics, Pakistan will continue facing macroeconomic woes over 2026 requiring IMF and other multi-lateral, and bilateral aid.

Philippines (PHL)

The Philippines entered 2026 in the midst of a deepening elite rupture that is materially undermining governance coherence. The governing alliance between President Ferdinand Bongbong Marcos Jr and the Duterte political dynasty has collapsed into open confrontation, transforming institutional politics into a zero-sum contest ahead of the 2028 presidential race. Mutual impeachment attempts have formalised the breakdown. Complaints filed in January 2026 accused Mr. Marcos of drug use, flood-control corruption, and complicity in the International Criminal Court’s (ICC) investigation into former president Rodrigo Duterte. Although the Marcos-controlled House dismissed the motions, Vice-President Sara Duterte now faces her third impeachment filing over the alleged misuse of confidential funds. Her unusually early declaration of a 2028 presidential bid is widely viewed as a defensive manoeuvre to consolidate legislative backing and deter removal. The feud is not merely theatrical; it has impaired state functionality. Budget approval processes have faced delays, anti-corruption protests have intensified — including large-scale demonstrations such as the Trillion Peso March and a 650,000-strong Iglesia ni Cristo rally — and public trust indicators have diverged sharply. Ms. Duterte’s approval rating stood at 56% in late 2025, compared to Mr. Marcos’ low of 34%, reflecting an erosion of executive authority at a sensitive juncture. Governance strain has been compounded by repeated natural disasters, stretching administrative capacity while political elites remain absorbed in intra-coalition warfare. Additionally, maritime tensions with China further expose sovereignty constraints. Water-cannon incidents near Palawan, airspace confrontations around Scarborough Shoal, and Beijing’s retaliatory measures against Kalayaan officials highlight Manila’s limited enforcement leverage at sea, particularly when domestic political fragmentation weakens strategic coordination. In our assessment, political instability risk remains elevated through 2026. While regime continuity is not immediately threatened, we think executive effectiveness will remain compromised, raising risks of protest escalation, policy drift, and episodic volatility in external relations. Given the upheaval on the political front, investment inflows are likely to decline over 2026. Coupled with easing government spending, Philippines is likely to see a slowdown in its growth momentum.

Singapore (SIN)

Singapore’s overall risk is unchanged at low, alongside a political landscape that remains one of the most stable in the entirety of Asia. In mid-2025, the People’s Action Party (PAP) had once again gained a majority meaning the party has won its 14th consecutive election. The PAP and Prime Minister Lawrence Wong had claimed 87 of the 97 seats possible in the election, while the Workers’ Party had won the remaining seats with Singh’s reappointment as the leader of opposition. Political interference remains medium low and legal & regulatory risk is unchanged as low. However, the leader of the opposition party, Pritam Singh, had his role stripped by PM Wong after his conviction for lying to a parliamentary committee, which deemed him unsuitable to continue serving as leader of the opposition. Prime Minister Wong also continues his efforts to challenge the south-eastern nation’s social inequality and immigration, however, Singapore’s tight constraints on public demonstrations and the freedom of press have reduced tensions. Political violence remains low.

Domestically, Singapore’s GDP growth is forecasted to slow slightly in 2026 to 1.8%, while estimates show a pick-up of growth to 2.5% in 2027. However, Singapore’s Q4 growth had come in at a staggering 5.7%, far exceeding the 3.7% estimate and pushing full year growth to its strongest since 2021. Growth in this quarter was driven by global demand for AI related products, semiconductors, and the expansions in biomedical manufacturing. Growth continued to remain strong despite pressures from U.S. tariffs. A sectoral levy applies a 100% tariff on Singapore’s branded pharmaceuticals, while exports to the U.S. would remain subject to a 10% tariff. In terms of inflation, the IMF forecast a rate of 1.3% in 2026 with expectations of a rise to approximately 1.7% in 2027. Therefore, the risk of doing business continues to be assessed as low. Government debt is forecasted to remain elevated in the coming years with the IMF expecting 176.3% of GDP in 2026 and 177% in 2027. However, such high levels of public debt are not a cause for concern, as all debt is held domestically alongside substantial financial assets that exceed the economy’s liabilities. Additionally, the Singapore dollar (SGD) is expected to continue its strong path into 2026, supported by stable economic policies, and is also likely to appreciate modestly against regional currencies. Sovereign non-payment risk and exchange transfer risk remain unchanged at medium-low.

Taiwan (TWN)                

Taiwan’s overall country risk score of medium-low reflects economic strength and only ongoing, rather than escalating tensions with China over reunification. Taiwan has finalized an agreement on a trade framework deal with the U.S. that reduces tariffs to 15% (the same as Japan and S Korea) and provides exemptions for certain goods. In exchange, Taiwanese companies have recommitted to large existing plans to build advanced semiconductor plants in the U.S. Additionally, the U.S. and Taiwan are negotiating a 2nd set of military purchase on top of the USD11bln agreed in December, though Taiwan parliament is deadlocked on funding for defense due to opposition concerns over scale and allocation of the budget. Meanwhile, China has maintained the intermittent large scale military exercises around Taiwan as part of China’s gray-zone warfare. It remains unclear whether President Trump is fully committed to keeping the strategic ambiguity policy, and the proposed Trump/Xi meeting in April needs to be watched closely to see whether China secures any concessions from Trump. On balance the strategic ambiguity policy, likely to be maintained by the U.S., suggests that any future China invasion would have a high risk of failure if the U.S. became involved. 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. 

Thailand (THA)

Thailand’s tense political climate may ease into 2026, with overall risk remaining medium high. In September 2025, former PM Paetongtan Shinawatra of the Pheu Thai Party (PTP) had been dismissed due to ethical violations over contact with her Cambodian counterpart.  This saw Anutin Charnvirakul, leader of the Bhumjai Thai Party (BJT), stepping in with the promise of dissolving parliament by January 2026 following Shinawatra’s removal by the Constitutional Court. Thailand’s February 2026 general election resulted in PM Anutin consolidating power winning 193 seats in the 500-seat parliament, and he further secured a coalition with the third place Pheu Thai Party, giving him a clear majority in parliament. However, members of the Thai public have raised concerns about the lack of transparency regarding the counting of votes, with some parties calling for nationwide recounts. Political interference is unchanged at medium, while legal & regulatory risk remains medium high. Thailand’s new government has expressed its focus on investment to stimulate the nation’s economic activity, while establishing debt relief measures to combat rising public and household debt. In addition, towards the end of 2025, violent border clashes with neighboring country Cambodia came to an end following the implementation of a second ceasefire in recent months, after 20 days of conflict that displaced over half a million people on both sides of the border. Political violence remains high, while China hopes both sides will stand by gradually implemented ceasefire terms.

Domestically, the IMF highlight the potential of a slight slowdown in GDP growth in 2026 to 1.6%, as Thai exports - a key economic driver - are expected to moderate, reflecting the impact of the 19% U.S. tariff rate. A slowdown in export growth, however, could be offset by Thailand’s domestic demand and tourism sector. Moreover, Thailand’s AI sector is experiencing major development and rapid expansion as the nation is directing investment into the data center market. The national aim has reached USD 79 bln worth of investments in the electronics and semiconductor market by 2050. Inflation is expected to remain low, following the IMF’s forecast of 0.7% in 2026, potentially reasoning for an additional cut to the central bank’s 1.25% policy rate. Government and household debt continue to contribute to Thailand’s debt challenge, as the IMF indicate a continued rise in government debt to GDP to 66.7% in 2026 and 67.7% in 2027. Therefore, sovereign non-payment risk and exchange transfer remain medium, as controls are planned to be imposed on gold trading to tackle the country’s ongoing issue of its overvalued Thai Baht, THB. Overall, the risk of doing business continues to be assessed as medium low.

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