Fitch Ratings: Fitch Ratings expects continuity to be the main theme of the elections among our rated Asian sovereigns due in 2024, but we view the chance of election outcomes influencing credit profiles as being higher in Pakistan (CCC) and Sri Lanka (Restricted Default, ‘RD’), which are both dependent on successful IMF programme implementation and official support, as well as Taiwan (AA/Stable), given potential geopolitical implications.

Almost half of our rated portfolio of Asian sovereigns will hold legislative or presidential elections in 2024. We believe it most likely that incumbent administrations will retain power in India (BBB-/Stable) and Bangladesh (BB-/Negative), during their general elections in April-May and January, respectively, pointing to the likelihood of broad policy continuity. Still, the size of the majority in the next Indian parliament could influence the ambitiousness of the administration’s reform agenda.

The outcome of legislative elections in April in Korea (AA-/Stable) is less certain, but the administration of President Yoon Suk-yeol could find it easier to advance his fiscal and economic reform agenda if the opposition’s current majority in the National Assembly is reduced or overturned. Passage of the administration’s fiscal rule, which is under discussion in the body, could help anchor fiscal policy in the medium term. The Maldives (B-/Negative) will likely hold legislative elections in 1H24, after the opposition won the presidential elections in September, but we expect broad economic policy continuity, focused on facilitating further growth in tourism. In Mongolia (B/Stable), higher spending ahead of legislative elections in 1H24 will limit the improvement in public finances from buoyant commodity revenues.

Indonesia’s (BBB/Stable) general election in February 2024 will herald the end of Joko Widodo’s presidency. The election remains competitive and, as normal, party platforms may provide only a broad guide to the direction of future policy, with the incoming president likely to govern at the head of a wide coalition of parties. The outcome of the presidential election could lead to changes in Indonesia’s fiscal stance, but this is not our baseline scenario, given broad political support for the deficit ceiling of 3% of GDP. Over time, the new government’s policy stance could influence Indonesia’s economic prospects and governance metrics, but we think any such effects are unlikely to drive sovereign rating changes in the near term.

Taiwan will hold closely fought presidential and legislative elections in January 2024. Our baseline assumes tensions with China do not undermine Taiwan’s near-term economic or political stability, but China could escalate pressure on the island if the Democratic Progressive Party (DPP) retains control of the presidency. The two leading opposition presidential candidates, from the Kuomintang and Taiwan People’s Party, have called for more dialogue with China and we believe China’s government views them as preferable to the DPP candidate. An opposition win could thus reduce cross-strait tensions to some extent in the near term, but underlying strains in the relationship would persist. We believe fiscal policy is likely to remain relatively consistent whichever party wins power, with medium-term fiscal discipline anchored by Taiwan's adherence to keeping public debt well below the 50% of GDP ceiling, as enshrined in the Public Debt Act.

Pakistan is due to hold parliamentary elections in February 2024 and Sri Lanka will hold presidential and parliamentary elections in 2024. IMF programmes in both countries should help anchor fiscal and economic policy. Nonetheless, their economic challenges are daunting and the potential for political volatility is high. There is still a risk that Sri Lanka’s IMF programme goes off track, or that Pakistan’s incoming administration fails to smoothly secure a successor programme to its current short-term IMF financing arrangement.