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Sovereigns

Global Home > Sovereigns

Abu Dhabi Stimulus Confirms Fiscal Adjustment is Over

Abu Dhabi's new economic stimulus programme will have limited sovereign credit impact given the sovereign's strong balance sheet and low fiscal break-even oil price. But it highlights the winding down of fiscal adjustment and suggests that the fiscal policy-making framework has seen little improvement during the period of low oil prices.

Credit Hotspot: Political Risk

Latest: Colombia Election Signals Policy Continuity

rating action

Denmark Affirmed at 'AAA'; Outlook Stable

High household mortgage debt increases the economy's vulnerability to macrofinancial shocks, although the risks are partially mitigated by high net household wealth, including pension assets. Public finances are sound. The budget recorded a 1% of GDP surplus in 2017, boosted by one-off revenues from corporate and pension yield taxes.

rating action

Affirmed: Ireland at 'A+'; Outlook Stable

Ireland's sovereign ratings are supported by strong institutions and a wealthy, flexible economy with income per capita among the highest in the 'A' category. These factors are balanced by still elevated levels of public and private debt, and external vulnerabilities.

rating action

Serbia Affirmed at 'BB'; Outlook Stable

A decline in the surplus from 1.2% of GDP in 2017 reflects Serbia's fiscal strategy to increase living standards and stimulate economic growth by maintaining a low tax rate environment (which is contributing to a declining revenue-to-GDP ratio), while increasing government spending in priority areas.

rating action

Affirmed: South Africa at 'BB+'; Outlook Stable

South Africa's ratings are weighed down by low trend growth, sizeable government debt and contingent liabilities and the highest inequality in the world, which raises policy risks. These weaknesses are balanced by a favourable government debt structure, deep local capital markets, a healthy banking sector and strong institutions.

China Slowdown Would Pressure Some US States

If a slowdown in China's economy led to a decline in US exports, several states with substantial agriculture exports and one with aircraft exports would likely see localized declines in economic activity and, thus, tax revenues, says Fitch Ratings. However, we would expect states with a high volume of imports from China would not be affected.

rating action

El Salvador Affirmed at 'B-'; Outlook Stable

Political agreements between the FMLN-led executive branch and the main opposition party, ARENA, over pension reform in October 2017 and the 2018 budget passed in January (with current-year financing authorizing) signaled a reduction in political tensions.

Podcast - Fixed Interests

Global Economic Outlook: Growth Robust to 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.

Korean Diplomacy Effort Has Scope to Ease Structural Risk

The summit meeting held this week between the US and North Korean leaders continues the de-escalation of tensions on the Korean peninsula; while the joint statement on denuclearisation, if followed through, could eventually allow the normalisation of North Korea's international relations and reduce the structural risks to South Korea's sovereign credit profile.

Rating Action

Affirmed: Hong Kong at 'AA+'; Outlook Stable

Hong Kong's ratings are underpinned by its exceptionally strong public and external finances, high income levels, and a resilient and flexible economy. The ratings are principally constrained by the territory's deep integration with lower-rated mainland China (A+/Stable), including via the banking sector.
 

rating action

Affirmed: Iceland at 'A'; Outlook Stable

Iceland's 'A' IDRs balance very high income per capita, strong performance on governance, human development and doing business indicators against high commodity export dependence, vulnerability to external shocks and experience of macroeconomic and financial volatility.

rating actions

Affirmed: Poland at 'A-'; Outlook Stable

Poland's 'A-' ratings reflect its strong macro fundamentals, supported by a sound monetary framework and solid banking sector. The ratings are constrained by weak GDP per capita relative to the peer median and high albeit declining net external debt.

rating action

Saudi Arabia Affirmed at 'A+'; Outlook Stable

We expect the central government deficit to narrow only gradually, to 6.4% of GDP in 2019 (SAR180 billion), from 8.3% in 2017, as renewed growth in spending offsets sharp increases in both oil and non-oil revenue. 

Rating Action

Thailand Affirmed at 'BBB+'; Outlook Stable

Thailand's 'BBB+' rating is underpinned by solid external and public finances, which enhance resiliency to economic shocks. 

rating action

Qatar's Outlook Revised to Stable; Affirms at 'AA-'

Qatar has successfully managed the fallout from last year's rupture of trade, financial and diplomatic relations with the Quartet consisting of the UAE, Saudi Arabia, Bahrain and Egypt. Public sector liquidity injections have stabilised the banking sector and stemmed the outflow of non-resident funding. 

rating action

Revised: San Marino's Outlook to Negative; Affirms at 'BBB-'

Asset quality remains very weak, with the gross non-performing loan (NPL) ratio increasing by 5.5pp in 2017 to 48.9% (and net of provisions by 3.5pp to 29.9%). Bank liquidity stabilised in 1Q18 and is adequate, 

rating action

Affirmed: Belgium at 'AA-'; Outlook Stable

Public finance outturns improved sharply in 2017. The general government deficit fell to 1.0% of GDP, from 2.5% in 2016. The improvement was driven by a continued decline in the spending-to-GDP ratio (0.9pp), and particularly buoyant tax receipts (0.5pp).

rating action

Bulgaria Affirmed at 'BBB'; Outlook Stable

Bulgaria's ratings are supported by its sound sovereign balance sheet and credible policy framework aimed towards gradual accession to eurozone membership. The economy is currently at a strong cyclical position and this will help Bulgaria's gradual convergence process towards higher income levels of higher rated sovereigns. 

Credit Hotspot: Trade Protectionism

Latest: Economic Protectionism and Global Markets

rating action

Portugal Affirmed at 'BBB'; Outlook Stable

The cyclical economic recovery reached its peak in 2017 when GDP grew by 2.7%. Fitch forecasts a gradual slowdown to 2.2% in 2018 and 1.8% in 2019, broadly in line with aggregate eurozone growth. 

cnbc europe

Turkey is 'Always at the Top of the List' for EM Ratings Concerns on External Financing

Speaking exclusively to CNBC Europe from the St. Petersburg International Economic Forum, James McCormack of Fitch Ratings says the credibility of Turkey's central bank is crucial for the confidence of investors. 

Limited Sovereign Risk Impact from Spain's New Government

The change in Spain's government following today's no-confidence vote against the former Prime Minister Mariano Rajoy has a limited impact on Spain's sovereign credit profile. 

Sovereign-Backed Bonds Are Not a Eurozone Game-Changer

The creation of European Sovereign Bond Backed Securities (SBBS) would be unlikely improve the eurozone's institutional underpinnings sufficiently to provide a near-term boost to the sovereign ratings of the bloc's lower-rated countries. We see high hurdles to SBBS implementation and several uncertainties as to how they would operate.

Eurozone Reforms Face a Difficult Path Ahead

EU policymakers are aiming to agree institutional reforms to the Economic and Monetary Union (EMU) at the June EU summit to address some of the structural shortcomings that became evident in the eurozone crisis. Fitch expects only slow and incremental progress due to a lack of consensus among member states.

Rising US Dollar Will Test EM Vulnerabilities Across Sectors

EM issuers are facing more challenging economic and financial conditions as interest rates rise and central bank monetary policy becomes less accommodative. Access more research on our Interest Rates Credit Hotspot.

Rating Action

Vietnam Upgraded to 'BB'; Outlook Stable

Vietnam's track record of policy-making focused on strong macroeconomic performance has been improving. GDP growth accelerated to 6.8% in 2017 from 6.2% in 2016 supported by the export-oriented manufacturing sector and continued growth in services. 

Global Perspectives

Dollar Strength and Emerging Market Stress are Inseparable

“Fear of floating” is alive and well among EM central banks says Global Head of Sovereigns, James McCormack, in his latest Global Perspectives commentary.

Political Risk in Sovereign Ratings

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 point to current political events that may negatively affect ratings such as activity in the Korean Peninsula, wider Middle Eastern tensions, US withdrawal from the Iran nuclear deal, and global oil prices. 

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Estonia Affirmed at 'A+'; Outlook Positive

Estonia's economy is growing above potential. Real GDP growth in 2017 reached a robust 4.9%, compared with 2.1% the previous year. The acceleration in GDP reflected a strong pick-up in investment from a low base, resilience in household consumption, and a highly favourable cyclical upswing across key trading partners. 

rating action

Affirmed: Rwanda at 'B+'; Outlook Stable

The 'B+' rating reflects Rwanda's strong governance and doing business metrics, low public debt/GDP and high growth potential. The rating is weighed down by its low income per capita and its persistent and large current account deficits.

Malaysia Election Results Make Policy Shift More Likely

The surprise victory of the opposition Pakatan Harapan (PH) coalition in Malaysia's general elections held on 9 May means a much higher likelihood of fiscal and economic policy change. The PH won 113 of 222 parliamentary seats, resulting in Malaysia's first electoral transfer of power since independence in 1957. 

US's Iran Move Raises Middle East Risks

The US's withdrawal from the Iran nuclear deal is likely to further increase geopolitical risk in the Middle East. However, the full impact depends on the severity of US sanctions snapback and the responses from Iran, the other parties to the deal, and major regional powers.

rating action

Affirmed: Colombia at 'BBB'; Outlook Stable

After two years of sub-par economic growth below 2%, Colombia's economic growth is expected to accelerate to 2.6% in 2018 and 3.3% in 2019 led by a pick-up in exports, partially supported by higher oil prices and investment.

Budget Proposal Supportive for EU, Cohesion Funds to Fall

The European Commission's proposal for the next Multiannual Financial Framework would support the creditworthiness of the European Union ('AAA'/Stable) despite the negative impact of Brexit on EU funding.

Contacts

James McCormack

Global

James McCormack

Analytical Group Head

+44 20 3530 1286

Tony Stringer

Global

Tony Stringer

Analytical Chief Operating Officer

+44 20 3530 1219

Jose Santos

Global

Jose Santos

Business Group Head

+34 93 323 9044

Brian Coulton

Economics

Brian Coulton

Analytical

+44 20 3530 1140

Sing Chan Ng

APAC

Sing Chan Ng

Business

+65 6796 7210

Stephen Schwartz

APAC

Stephen Schwartz

Analytical

+852 2263 9938

Ed Parker

EMEA

Ed Parker

Analytical

+44 20 3530 1176

Claire Dopson

EMEA

Claire Dopson

Business

+44 203 530 1405

Paul Gamble

Emerging Europe

Paul Gamble

Analytical

+44 20 3530 1623

Jan Friederich

Middle East & Africa

Jan Friederich

Analytical

+852 2263 9910

Shelly Shetty

Latin America

Shelly Shetty

Analytical

+1 212 908 0324

Diego Alcazar

Latin America

Diego Alcazar

Business

+1 212 908 0396

Charles Seville

North America

Charles Seville

Analytical

+1 212 908 0277

Michele Napolitano

Western Europe

Michele Napolitano

Analytical

+44 20 3530 1623

Arnaud Louis

Global

Arnaud Louis

Analytical

Supranationals

+33 144 299 142