Asia-Pacific is bracing for the double impact of surging input prices and higher borrowing costs. Inflation is eroding firms' margins and consumers' purchasing power. These surging prices and higher borrowing costs are driving tighter liquidity access, particularly for weaker-rated borrowers seeking to refinance. With China's property problems and sporadic COVID lockdowns hindering activity, S&P Global Ratings has lowered the country's expected growth in 2022 to 3.3% from 4.2%. For Asia-Pacific, expected growth falls to 4.2% from 4.6%. Weak global demand and subdued consumption crimp firms' cost pass-through ability. In particular, midstream and downstream industries (such as capital goods, chemicals and building materials) could see diluting rating headroom. Meanwhile, households' disposable income may fall as higher food and energy prices bite. Sectors recovering from COVID's earlier hit, and those reliant on discretionary spending, will feel the pain most.