Fitch Ratings: Fitch Ratings’ ‘neutral’ 2026 sector outlook for global sovereigns reflects expectation of broadly flat world GDP growth, reduced uncertainty over US tariffs and lower policy rates. However, material risks emanate from structural shifts in trade, technology, geopolitics and financial markets, while public finances are increasingly stretched in several major economies.

We expect broadly flat global GDP growth, but risks to this include renewed trade war, a deepening downturn in China, a reappraisal of returns on AI investments, US overheating and financial market shocks. Greater clarity on US tariff policy has now emerged after a flurry of announcements and deals but much of the impact is yet to bite. There is also likely to be further volatility in 2026 – albeit in a narrower range than in 2025 – given the US’s approach, legal challenges, US-China competition and the scheduled review of the USMCA.

Fiscal consolidation will be painful for many sovereigns and aggregate government debt will continue to rise rapidly reflecting sizeable budget deficits in some of the world’s biggest economies, including the US and China. Rising interest costs, sluggish GDP growth, structural expenditure pressures and difficult political backdrops compound the medium-term challenges of shoring up public finances.

Political risks remain to the fore and could spike from the shift underway in US foreign policy, the US-China power rivalry, military conflicts, elections, fiscal strains, populism and disillusion about inequality, corruption and youth employment prospects.

Rating Outlooks are broadly stable going into 2026, with 10 Positive and nine Negative. This follows net upgrades of eight so far in 2025, seven of which were from emerging markets.

‘Global Sovereigns Outlook 2026’ is available at www.fitchratings.com or via the link above.