17 Jul 2014
Fitch: Stabilisation in Eurozone drives improving sovereign rating trend
FXStreet (London) - Fitch Ratings says in its 2014 Mid-year Sovereign Review and Outlook report that a stabilisation in the Eurozone has supported an improving trend in global sovereign rating actions and a rebalancing towards fewer negative outlooks in the first half of 2014, indicating that downward pressure on sovereign creditworthiness has reduced.
According to the ratings agency, this improving trend reflects principally the stabilisation and improvement of sovereign ratings and outlooks in the developed market economies, in particular the Eurozone. The first quarter of this year saw upgrades for both Spain (to BBB+/Stable) and Greece (to B/Stable), reflecting improvements seen by Fitch in the fiscal positions and macroeconomic performance of the peripheral Eurozone countries.
In contrast, Fitch says the net upward momentum in emerging market sovereign ratings since 2010 has stalled, extending a trend observed in 2013, as many face more challenging growth conditions, difficult policy trade-offs and political or geopolitical pressures. According to the agency, this represents further evidence that the secular trend of convergence in the ratings of developed and emerging market sovereigns is starting to reverse. Fitch suggests in its report that this reversal will continue in the second half of 2014 and into 2015. Negative outlooks on DM sovereigns are now outnumbered by those on oositive (three to two), while EMs exhibit a heavily negative balance, with 12 on negative outlook and only five on positive.
Fitch forecasts global economic growth to accelerate gradually to 2.7 percent in 2014 and 3.1 percent in 2015 and 2016, from 2.4 percent in 2013. Growth will largely result from a firmer and more balanced recovery across DMs, although weak world trade and higher oil prices add to risks. We forecast growth in EMs at 4.3 percent in 2014, 4.8 percent in 2015 and 4.9 percent in 2016, down from 4.7 percent in 2013, reflecting constraints from infrastructure bottlenecks, weak business environments and unbalanced growth that have reduced medium-term growth potential in many countries.
According to the ratings agency, this improving trend reflects principally the stabilisation and improvement of sovereign ratings and outlooks in the developed market economies, in particular the Eurozone. The first quarter of this year saw upgrades for both Spain (to BBB+/Stable) and Greece (to B/Stable), reflecting improvements seen by Fitch in the fiscal positions and macroeconomic performance of the peripheral Eurozone countries.
In contrast, Fitch says the net upward momentum in emerging market sovereign ratings since 2010 has stalled, extending a trend observed in 2013, as many face more challenging growth conditions, difficult policy trade-offs and political or geopolitical pressures. According to the agency, this represents further evidence that the secular trend of convergence in the ratings of developed and emerging market sovereigns is starting to reverse. Fitch suggests in its report that this reversal will continue in the second half of 2014 and into 2015. Negative outlooks on DM sovereigns are now outnumbered by those on oositive (three to two), while EMs exhibit a heavily negative balance, with 12 on negative outlook and only five on positive.
Fitch forecasts global economic growth to accelerate gradually to 2.7 percent in 2014 and 3.1 percent in 2015 and 2016, from 2.4 percent in 2013. Growth will largely result from a firmer and more balanced recovery across DMs, although weak world trade and higher oil prices add to risks. We forecast growth in EMs at 4.3 percent in 2014, 4.8 percent in 2015 and 4.9 percent in 2016, down from 4.7 percent in 2013, reflecting constraints from infrastructure bottlenecks, weak business environments and unbalanced growth that have reduced medium-term growth potential in many countries.