For the most exposed sovereigns, the pace of increased frequency and severity of natural disasters related to rising sea levels and the effectiveness of adaptation measures will determine the degree of credit-negative effects.
The deal reduces political uncertainty, which will strengthen global risk appetite and bolster the ongoing rally in emerging market capital inflows.
African regional and local governments' (RLGs) weak fiscal capacity will limit their ability to spend on infrastructure and other capital projects, which, in turn, will constrain their sustainable development.
The impact of trade tensions is spreading beyond exports to business investment, which risks reducing potential growth and making it harder for APAC governments to address long-term fiscal, liquidity and demographic challenges.
LatAm governments’ slow progress in rebuilding lost fiscal flexibility is further complicated by rising social unrest across the region, weighing on business sentiment and investment, and undermining policy formation and fiscal consolidation efforts.
Although the probability of a military confrontation in the Middle East is low, a potential full-blown conflict would pose a threat to the creditworthiness of debt issuers in the region.
In 2020, Russia’s regional governments will continue to record revenue growth, facilitating an increase in spending without taking on further debt and reducing leverage.
On 3 December, the Russian government announced RUB45 billion ($700 million) in federal grants to regions that performed best on key performance indicators set by President Vladimir Putin earlier this year.
In 2020, Argentina's regional governments face an increasingly challenging operating environment, characterized by national policy changes and rising social pressures that will undermine their financial results and ability to refinance debt.
Growth prospects for non-investment grade sovereigns have softened on global and domestic factors, highlighting underlying credit weaknesses.
The main challenges facing Chinese provinces in 2020 are the continued slowdown in national GDP growth, which will weigh on their budgetary revenue, and the local state-owned enterprises (SOEs), whose liabilities are around RMB 70 trillion.
Our negative outlook reflects continued sluggish growth, with shifts in trade policy, political priorities and financial flows leaving emerging market issuers vulnerable to sudden shocks.
The amendment will reduce regions' refinancing needs over the next five years and minimise funding cost pressure stemming from the need to refinance budget loans with market borrowing.
Despite government measures to help reduce India’s slowdown in economic growth, prolonged financial stress among rural households, weak job creation, and a credit crunch have increased the probability of a more entrenched slowdown.
The Latin America Banking Monitor is the inaugural report of a new series providing a semi-annual review of key credit developments in the Latin American banking market.
South Africa’s high unemployment, income inequality and related social and political challenges have proven to be a greater obstacle to government plans to raise potential growth and contain fiscal deficits than we expected a year ago.
China's regional and local governments play a critical role in mitigating and potentially transmitting economic and financial risks within China’s highly interconnected institutional framework, economy and financial system.
This edition focuses on a range of sectors in countries such as India, Argentina, Turkey, China, among others, with a data-rich appendix of metrics for 105 EM sovereigns.
Argentina’s consumer activity will suffer through 2020 in line with a shrinking economy, worsening economic conditions and a reluctance to make big purchases.
Turkey’s recent military incursion into Syria has resulted in US sanctions which, while limited, are likely to increase economic risks because of the knock-on effect they will have on investor and business sentiment.
Third quarter 2019 score weakens to second-weakest level.
Nigeria's banks and payment service companies will expand their products and increase revenue while cutting costs as usage of electronic platforms rises.
The new rule is credit positive because it increases agility and efficiency by simplifying the authorization of foreign investment in banks and the establishment of branches of foreign banks in Brazil.
The ratification may accelerate the introduction of environmental regulation previously targeted for 2025.
Output disruption will not leave a long-lasting impact on the government or Saudi Aramco, but highlights elevated and broader-based exposure to geopolitical risk than previously assumed.
Mexico’s proposed new budget assumes relatively optimistic GDP growth and oil production. These assumptions result in the budget overestimating next year's government revenue and underestimating the financial support that PEMEX may require.
Although Argentina’s capital controls should ease negative exchange-rate pressures, its central bank reserve losses are likely to persist as individuals and firms continue to withdraw their foreign-currency deposits from the banking system.
A shock to financing conditions would significantly reduce fiscal strength and increase external vulnerability risk for many frontier markets, and some emerging markets.
The three-notch downgrade from B2 reflects the rising likelihood of losses for investors further to the government’s decision to delay the repayment of around $8 billion in short-term debt and its intention to restructure longer-term debt maturities.
Our outlook for Mexico’s banking system is negative. A weaker economy will limit government support, and lead to higher delinquencies and lower volume growth for banks.
Countries across the CIS have made tangible progress implementing reforms over recent years, bolstering government effectiveness. However, for some sovereigns, the momentum for policy action is fading as economic and external challenges have ebbed.
The central bank asked for comments on its planned approach to resolution planning, indicating that it aims to use statutory bail-in legislation once enacted to ensure banking stability.
The majority vote for Alberto Fernandez in Argentina’s recent primary elections resulted in a 15% depreciation of the Argentine peso, weakening the country’s economic prospects for the remainder of 2019.
The Central Bank of Nigeria's drive to push Nigerian banks to lend more while economic growth is still weak will crease NPLs for the banks and slow down asset quality improvements.
Our credit view for Thailand reflects the sovereign's very strong public and external finances, as well as lingering political risk and demographics and labour skills challenges.
Policy reversal following elections in October could lead to further damaging currency shocks and hamper access to the international capital markets, leaving most debt issuers at risk.
This edition focuses on a range of sectors in countries such as India, Argentina, Turkey, China, among others, with a data-rich appendix of metrics for 105 EM sovereigns.
We rate 36 Indonesian corporates across six core sectors, the bulk of which continue to demonstrate stable credit trends. This report provides an insight into the key credit themes impacting each sector, including oil and gas, property and more.
In the inaugural issue of our State of the Brazilian Consumer publication, we discuss how the gradual improvement in employment since the end of Brazil’s severe recession of 2015-16 has contributed to consumption and economic growth.
Our credit view of Argentina reflects its large and relatively wealthy economy against rising policy uncertainty and the risk it poses for increased financing pressures and eroding buffers.
In a new cross-sector report we study the effects of corruption, commodity prices and portfolio flows, technological disruption, and skills gaps on Latin America’s business, finance and macro-economic conditions.
The latest developments are a further illustration of the erosion of the central bank's independence in terms of setting monetary policy and also the country's institutional strength.
The average covenant quality (CQ) score for Asian high-yield bonds in the second quarter of 2019 was 3.26 (moderate ↓)
The wave of mergers and acquisitions (M&A) sweeping through sub-Sarahan Africa's (SSA) banking markets is credit positive for SSA bank creditors. We expect the drivers of consolidation to remain in place over the next two years.
China’s economy-wide leverage is likely to continue rising, with pockets of financial stress developing periodically for some local banks or State-Owned Enterprises (SOEs).
The recent restructuring of Barbados’s local-currency debt has cut the stock of government debt to 90% of GDP from 101% previously, significantly reduced the interest burden and lowered the government’s financing needs and overall liquidity risks.
Various central government initiatives have strengthened governance standards and tightened federal oversight of regional governments, but some regions to still face high refinancing risks.
Backed by strong profitability, Islamic banks in Malaysia and Indonesia have plans to step up investment in digitization. These efforts will lead the industry to expand further at lower cost.
Argentina's Federal Fiscal Responsibility Council published the results of its evaluation for 2018 and first-quarter 2019, which showed that the provinces generally were in compliance. The results are credit positive.
All but five of the 47 rated South and Southeast Asian high-yield companies have protections to limit the effect of a significant depreciation of their local currencies against the US dollar.
After a period of relative calm, the Turkish lira came under renewed pressure in the first half of 2019 amid investor concerns about accelerated reserve depletion and expanding fiscal deficits.
Mauro Leos and Gabriel Torres discuss the credit implications of income inequality. While income inequality is not a differentiating factor of ratings across all sovereigns, for some, rising income inequality exacerbates broader credit challenges.
A proposal to allow government-managed retirement funds to compete directly with banks in offering payroll loans would be challenging for banks that have a niche in payroll loan.
Our credit view of Turkey balances its large economy and healthy public finances against further erosion in institutional strength and high external vulnerabilities.
An analysis of the sovereign credit implications of economic growth dynamics and fiscal consolidation in India.
China will maintain its gradual and cautious approach to financial liberalization. However, the pace will gradually accelerate as the cost of restrictions on more strategically important sectors becomes increasingly apparent.
Bahrain, Kuwait, Qatar and Iraq, and to a lesser extent, Saudi Arabia and the UAE, depend on the Strait to transport oil and gas exports, exposing them to geopolitical risk.
This video outlines how growth recovery and debt issuance will continue while highlighting the fluidity of the political environment in key nations across Africa, as well as then increasing importance of fintech to banking growth.
Structurally low growth, fiscal strength eroding but a number of factors insulate the sovereign's credit profile from financing shocks.
This new compilation showcases our latest research on key EM sectors, covering China, Argentina, India, Turkey, Russia, and others. The report also offers a data-rich appendix focused on 106 EM sovereigns.
Our comparison of the state of banking service digitalization in Commonwealth of Independent States (CIS) countries shows that Russia is far ahead of the others in this area.
This report outlines key rating trends and drivers for emerging market sovereigns, non-sovereigns and non financial corporates
In this podcast, Singapore-based Managing Director Terry Fanous and Associate Managing Director Ian Lewis discuss coal power in Asia and the challenges surrounding the transition to a low-carbon economy.
A surge in Chinese property bond issuance resulted in a significant weakening of cash leakage and risky investments scores (23% and 12% respectively from the previous 12 months). EM covenant quality remains stronger than in North America and EMEA.
Argentina's provinces will continue to face fiscal challenges as the effects of the recession filter through. We expect real GDP to contract by 1.5% this year, following a 2.5% contraction last year, weighing on provinces' revenue intake.
Russian oil and gas companies will record strong financial results in 2019, driven primarily by their dominant upstream operations. EBITDA margins will stay broadly flat after a record 2018.
Financial policies remain balanced despite increased capital spending and continuing high dividends. Exposure to fragile domestic demand is balanced by steelmakers’ competitiveness in export markets.
Brazil’s new government has announced a wide-ranging reform agenda, including fiscal and structural reforms aimed at improving the overall business environment and reducing the role of the state in the economy.
Although our baseline expectation is for credit conditions to remain steady this year, growing vulnerabilities will likely test the region's credit fundamentals as financing conditions tighten, trade tensions persist and China's economy cools.
Ruling AK Party loses control of Ankara and other key cities amidst deepening recession ahead of long election gap, which may propel long-delayed economic reforms.
The credit implications of the disclosure of unreported financial liabilities depend on their scale, schedule of payments, denominated currency and the contractual seniority.
Under the Senate-approved proposal, credit bureaus in Brazil would no longer need borrowers' authorization to collect data about payment histories, including positive credit data.
A large share of rated CIS banks' credit profiles are weakened by corporate governance risks. Irregularities and financial weakness stemming from poor corporate governance have been key reasons for bank closures in the region.
The eight rated Indonesian developers face increasing funding costs amid upcoming debt maturities, which will weaken interest coverage of rated developers.
Russia’s return to investment grade reflects an improvement in the country’s already robust public finances, enabling it to withstand the effect of further sanctions that the US is likely to apply in the coming months.
Slower global growth will weigh on economic momentum in emerging markets in 2019. Political risks will be in focus in large markets in Asia, as well as in Latin America.
New CEOs at Brazil's three state-owned banks recently laid out new strategic priorities that will sharpen focus on businesses and market segments critical to earnings and improve capital.
this study, we examine the credit performance of nonfinancial companies in emerging markets from 1995 to 2018, the variance among countries, the contributing factors to defaults, and a comparison with trends in advanced markets.
Banks are bearing the brunt of government interventions to bolster the economy. Most rated corporates will continue to display a degree of resilience to the downturn, but renewed exchange rate volatility would make operating environments challenging.
The negative outlook reflects still present credit challenges stemming from fiscal and external vulnerabilities amid tightening global liquidity conditions and intensifying global trade tensions, despite gradually improving growth prospects.
The region's economic growth momentum will persist while broadly improved debt structures will mitigate risks from tightening global liquidity. Downside risks stem from evolving political landscapes and their policy implications.
Against the background of the ongoing recession across the national economy, Argentina’s provinces will face increased financing costs, weaker debt metrics and greater refinancing risks due to higher interest rates and foreign-currency debt exposure.
The operating environment is improving in key CIS markets, but GDP growth is moderate and geopolitical risks persist for Russia and Ukraine.
As China's regional and local government bond market grows, we see an increasing focus on, and larger quotas for, Special Purpose Project Bond (SPPB) issuances. SPPBs are often labeled revenue bonds in China, but differ from revenue bonds in the US.
An unconventional style of policy execution weighs on market sentiment while policy proposals are credit negative for oil and construction companies and Mexican states in particular.
Rising infrastructure spending as well as the limited borrowing capacity of Chinese regional and local governments (RLGs) mean high liabilities of local state-owned enterprises (SOEs) will continue to grow, constraining the credit quality of RLGs.
Our stable outlook for African banks reflects expectations of a slight acceleration in growth and stricter regulation that supports financial stability; but risks are titled to the downside.
The change will help to address the mismatch between regional and local governments' limited fiscal resources and significant regional social spending responsibilities.
Stable rating trends for non-financial corporates in Asia Pacific is likely to continue through 2018 but intensifying US-China trade disputes and slowing growth increase downside risks.
Declining federal transfers, weak own-source revenue and higher levels of current expenditure are leading to lower levels of infrastructure spending by Mexican states, a credit negative.
Continued, though slowing, GDP growth in Asian and global economies will support stable credit conditions. Rated companies’ financial leverage will improve slightly on moderate earnings growth.
Our outlook balances strong domestic growth and other buffers in most emerging markets with more challenging credit conditions, as global growth slows, interest rates rise and the effect of US-China trade frictions unfolds across the global economy.
Insurance markets in six major Association of Southeast Asian Nations (ASEAN) are at various stages of development. Their insurance growth prospects are supported by strong socio-economic fundamentals.
The Chinese government is likely to continue to tolerate isolated bond defaults because it considers liquidation as one of the options in resolving debt problems of zombie companies.
Overall leverage is moderate in LatAm compared to other regions, which supports their economies' resilience to shocks. Exceptions include Argentina, Barbados, Belize and Jamaica.
Jair Bolsonaro’s election as Brazil's president will improve investor sentiment, bolstering the real and business confidence, but the exact direction of his economic policy remains unproven.
This edition shows LatAm high-yield issuances in 9M 2018 at lowest level since 2011 on fewer deals from Petrobras, external uncertainties and country-specific issues.
We expect Russian non-financial companies' credit quality to remain stable in 2019 amid continued modest economic growth. However, the threat of additional US sanctions remains a key risk.
High debt burdens and institutional limits related to fiscal management constrain the fiscal profiles of many Caribbean sovereigns.