The Asia-Pacific credit outlook remains steady in 2025, but S&P Global Ratings warns that trade tensions and slowing growth could pose risks in the coming quarters.
Asia-Pacific credit outlook steady but tariffs and weak trade cloud growth
The Asia-Pacific credit outlook is entering a period of uncertainty despite strong first-half growth and favorable financing conditions, according to a new report from S&P Global Ratings. The agency’s latest analysis, “Credit Conditions Asia-Pacific Q4 2025: On A Jagged Course,” highlights that while resilient domestic consumption and frontloaded exports supported the region earlier this year, weaker trade is expected to weigh on growth from the fourth quarter.
S&P Global Ratings projects that Asia-Pacific economic growth will moderate to 4.4 percent in 2025 and further to 4.0 percent in 2026. The slowdown is attributed largely to the effects of tariffs and global trade frictions. Analysts caution that abundant liquidity, narrowing spreads, and stable yields have led markets to underestimate potential risks, leaving asset classes such as bonds, equities, and real estate vulnerable to corrections if shock events occur.
China, the region’s largest economy, is under pressure both externally and internally. High U.S. tariffs on Chinese goods are constraining exports, while a prolonged property market crisis and fierce price competition in consumer-facing sectors are reducing corporate margins. S&P Global Ratings suggests that more policy stimulus may be needed to restore confidence and support growth momentum.
At the same time, the weaker U.S. dollar is giving Asia-Pacific central banks more flexibility in setting monetary policy. A dovish stance by the U.S. Federal Reserve has helped reduce borrowing costs, ease cash flow pressures, and support household consumption through cheaper mortgages. While this provides temporary relief for indebted borrowers, the report warns that trade-related risks remain elevated.
New tariffs, particularly in the pharmaceutical and semiconductor industries, could further weaken investment sentiment. Limited clarity around trade policy may also discourage manufacturers from committing to new capital expenditure, putting additional strain on long-term growth prospects.
S&P Global Ratings emphasized that while the Asia-Pacific credit outlook is stable for now, the situation could change rapidly if trade or broader macroeconomic risks escalate. The agency will host a live webinar on October 9 to discuss its updated macroeconomic forecasts, industry credit trends, and key risk factors shaping the region’s outlook.