Global sovereign debt is heading into 2026 under what Fitch Ratings describes as a state of “fragile stability,” as mounting fiscal pressures and uneven economic momentum weigh on the world’s largest economies.
The agency’s latest annual outlook, released on Tuesday, offers a neutral assessment for global sovereign credit but underscores a landscape marked by persistent vulnerabilities.
According to Fitch, the world economy is expected to grow at roughly the same pace as in 2025. Yet the headline stability masks a series of significant risks that could disrupt the recovery.
These range from renewed U.S.–China trade frictions and deeper economic deceleration in China to uncertainty surrounding the long-term returns of massive investments in artificial intelligence. The agency also notes the possibility of a slowdown in the U.S. economy or sudden shocks across global financial markets.
Fitch’s projections show that the United States and China will again post some of the world’s largest fiscal deficits next year, accelerating the upward trajectory of global government debt. Several structural factors are feeding this trend: rising interest costs, softening economic growth, expanding baseline expenditures, and increasingly complex political landscapes that make fiscal consolidation more challenging for governments.
“Higher debt-servicing burdens and entrenched structural spending will leave many major economies with limited fiscal room in 2026,” the report notes, adding that political polarization in several countries is slowing progress toward stabilization.
On the trade front, Fitch says clarity has improved following a wave of recent policy announcements from Washington on tariffs and trade agreements. However, the full economic impact of these measures has yet to surface.
With the U.S.–China rivalry still intensifying and the 2026 review of the USMCA (known regionally as “Yousmca”) approaching, the agency warns that trade tensions could easily resurface.
Fitch highlights political risk as a defining theme for the coming year. Geopolitical tensions, protracted armed conflicts, and growing social pressures tied to inequality and youth unemployment are expected to shape the global economic narrative. The rise of populist movements across multiple regions adds an additional layer of uncertainty for policymakers and investors.
Despite the unsettled economic backdrop, Fitch says the overall outlook for sovereign ratings is trending toward stability. Ten countries currently hold a “positive” outlook, while nine are classified as “negative.” The agency recorded eight net upgrades in 2025, seven of which were achieved by emerging-market economies, an indication of improving resilience in some developing regions.
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