Fixed Interests

Jan Friederich, Head of Middle East and African Sovereign Ratings, explains the key drivers behind the decision to revise the outlook on South Africa to Negative and affirm the rating at ‘BB+’ in a conversation with Stephen Schwartz, Senior Director, Sovereign Ratings. They also discuss South Africa’s economic and political outlook from a credit perspective.

As a result of political polarization, fiscal constraints, and rising tensions with the U.S. over immigration policy, Central America faces political instability; currently, three out of five countries in the region have negative outlooks. In the latest edition of Fixed Interests, Shelly Shetty, co-Head of Latin American Sovereigns, and Carlos Morales, Director of Sovereign Ratings, discuss the latest trends in Central America Sovereigns as well as the more common themes behind some of the recent negative rating actions.

Michele Napolitano, Head of Western Europe Sovereigns, and Alex Muscatelli, Director, discuss the failure of Pedro Sanchez to win a confidence vote in the Spanish parliament on 25 July. This could delay fiscal consolidation measures scheduled for 2020, although this would not significantly change our debt-to-GDP projections. The increase in political instability in recent years has not damaged the economic recovery that has supported Spain’s fiscal adjustment. However, a cyclical slowdown will lessen the role of GDP growth in deficit reduction.

Stephen Schwartz, Head of Asia-Pacific Sovereign Ratings, and Thomas Rookmaaker, Director and Lead Analyst for India of Sovereigns Ratings, discuss India’s fiscal and growth outlook, along with the key drivers of the sovereign rating.

Tony Stringer, Managing Director, Global Sovereigns and Ed Parker, Head of EMEA Sovereign Ratings discuss Sub-Saharan African (SSA) debt, noting government debt/GDP has risen steeply in SSA, with the median of 19 Fitch-rated sovereigns doubling since 2012 to 56% at end-2018. Fitch believes that SSA sovereigns have used some of the fiscal space afforded by the Highly Indebted Poor Countries initiative to boost investment, GDP growth and human development.

Tony Stringer, Managing Director, Global Sovereigns and Brian Coulton, Chief Economist, say threats to the global growth outlook from trade protectionism have become much more significant in recent months. The breakdown of US-China trade negotiations, the recent use of a US tariff threat to pressure Mexico to change migration policies, and the rising chance of a no-deal Brexit all raise the possibility of disruptions to global trade that could have a much bigger impact on the world economy than anything seen over the course of 2018.

Shelly Shetty and Charles Seville, Co-Heads of Sovereigns Ratings for the Americas, discuss the recent downgrade of Mexico's credit ratings. Key drivers for the rating action include liability of Pemex's deteriorating credit profile, poor economic growth performance exacerbated by trade tensions, and domestic policy uncertainty from the new administration.

Shelly Shetty, Co-head of Sovereigns—Americas, and Todd Martinez, Primary Analyst for Argentina, discuss the Negative Rating Outlook for the country against a backdrop of continuing high inflation, economic contraction, as well as a competitive presidential election in October.​

Jan Friederich, Head of Middle East & Africa Sovereign Ratings, and Krisjanis Krustins, Director focusing on GCC sovereigns, discuss the fiscal trends in the region, the risks stemming from the oil market, the credibility and direction of reforms and the outlook for sovereign ratings.

In the latest Fixed Interests Podcast,Tony Stringer, Managing Director, Global Sovereigns and Brian Coulton, Chief Economist, discuss the Global Economic Outlook for 2019, noting global growth prospects have deteriorated significantly since December 2018.

Shelly Shetty, Co-head of Sovereigns—Americas, and Richard Francis, Primary Fitch Analyst for Colombia, discuss the fiscal and growth challenges for Colombia and how the new government is trying to tackle those issues.​

Tony Stringer Managing Director, Global Sovereigns and Erich Arispe, Director, Fitch Ratings, discuss the Positive Outlook for Russia which reflects continued progress in strengthening the economic policy framework underpinned by a more flexible exchange rate, a strong commitment to inflation-targeting and a prudent fiscal strategy. This policy mix has increased the economy's resilience to shocks and helped preserve macroeconomic and financial stability despite the heightened sanctions' risk

Public finances in several developed markets look exposed when the next recession eventually strikes, with potential negative consequences for some sovereign ratings.

Persistently high fiscal deficits leading to rising debt burden and high government financing needs has led Fitch to downgrade Costa Rica. Charles Seville, Head of North America Sovereigns, and Carlos Morales, Director, Sovereigns, discuss Costa Rica in more detail, exploring the reasons behind the downgrade and how this negative outlook may be resolved.

Tune into our latest Fixed Interest podcast with Brian Coulton, Chief Economist and Tony Stringer, COO, Global Sovereigns Group, who discuss what's in store for the global economy in 2019. For more content providing in-depth insight into credit in 2019, including reports, videos and webinars visit our dedicated Credit Outlook page https://your.fitchratings.com/outlooks-2019.html

Protectionist US trade policies have now reached the point where they are materially affecting what remains a strong global growth outlook, with the US-China trade battle prompting us to downgrade our 2019 global GDP forecast, says Fitch Ratings in its new Global Economic Outlook (GEO).

Tune into the latest Fixed Interests and listen to James McCormack, Global Head of Sovereigns, and Brian Coulton, Chief Economist, discuss how global growth prospects remain robust despite rising trade tensions and political risks. Accelerating private investment, tightening labor markets, pro-cyclical US fiscal easing and accommodative monetary policy are all supporting above-trend growth in advanced economies. While China’s growth rate is holding up better than expected so far in the face of slowing credit growth; Russia and Brazil continue to recover slowly.

Political risk is a key determinant of sovereign creditworthiness, Ed Parker, Head of EMEA Sovereign Ratings and James McCormack, Global Head of Sovereign Ratings, say. They highlight that political and governance issues were the driving or supporting factors in a cumulative 47% of sovereign downgrades, rating crises, or defaults from 1997 to present. They point to current political events that may negatively affect ratings such as: • Activity in the Korean Peninsula • The Gulf and wider Middle Eastern tensions • US withdrawal from the Iran nuclear deal • Global oil prices

Tune into the latest Fixed Interests and listen to James McCormack, Global Head of Sovereigns & Supranational Group, Fitch Ratings and Andrew Fennell, Director, Sovereigns, Fitch Ratings, discuss Fitch’s recent affirmation of China’s ‘A+’ rating. James and Andrew explore current policy settings, the growth outlook, and provide insights into the deleveraging story whilst giving Fitch’s view on whether household debt will become a credit issue.

The global economy is experiencing boom-like growth conditions and central banks are becoming less cautious as inflation risks rise, according to Fitch's latest "Global Economic Outlook" (GEO). The US, eurozone and China are all likely to grow well above trend in 2018 and global economic growth is set to remain above 3% for three consecutive years until 2019, a performance not achieved since the mid 2000s.