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Sovereign ratings wrap: Argentina downgraded; S&P lifts UK outlook


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Sovereign ratings wrap: Argentina downgraded; S&P lifts UK outlook

S&P Global Market Intelligence presents a summary of ratings actions on sovereigns and other key territories from Dec. 16 to Dec. 22.


* S&P Global Ratings affirmed the U.K.'s long- and short-term sovereign credit ratings at AA/A-1+ and revised its outlook to stable from negative following the Dec. 12 general election that gave the ruling Conservative Party its greatest parliamentary majority since 1987, making it highly likely for Britain to exit the European Union with a withdrawal agreement by Jan. 31, 2020. The rating agency said the majority will provide Prime Minister Boris Johnson's government with more room to engage with Brussels over the terms of their post-Brexit relationship.

* Meanwhile, Fitch Ratings affirmed the U.K.'s long- and short-term issuer default ratings at AA/F1+ and removed the country from Rating Watch Negative, where it has been placed since late February, saying the Conservative Party's majority reduces the risk of a "disruptive" no-deal Brexit. The rating agency assigned the country a negative outlook, reflecting its view that uncertainty regarding its future relationship with the EU will persist for some time.


* Fitch downgraded Argentina's long- and short-term foreign-currency issuer default ratings to RD, or restricted default, from CC/C after the new government of President Alberto Fernández unilaterally extended its repayment of short-term dollar-denominated treasury bills. The rating agency said the extension qualifies as a distressed debt exchange that has concluded, added that it will upgrade the ratings to an appropriate level going forward. Argentina's local-currency ratings were affirmed at CC/C.

* S&P also downgraded Argentina's foreign-currency ratings to selective default, or SD/D, from CCC-/C. The rating agency also lowered the country's long-term issue and local-currency sovereign credit ratings to CC from CCC- and affirmed the short-term rating at C, over the heightened vulnerability of a distressed debt exchange as Fernández's government has signaled a restructuring of all long-term debt with the private sector.

* DBRS Morningstar revised the trend on Mexico to negative from stable, while confirming the country's long- and short-term foreign- and local-currency issuer ratings at BBB (high)/R-1 (low). The outlook revision reflects Mexico's weakening medium-term growth outlook, poorly targeted infrastructure spending, reduced reliance on private capital and less predictable policy making.

* Meanwhile, S&P affirmed Mexico's foreign-currency ratings at BBB+/A-2 and local-currency ratings at A-/A-2, with a negative outlook. The action reflects the country's political stability over the last two decades, moderate economic growth, a floating exchange rate regime, and the central bank's credible inflation-targeting monetary policy.

* S&P revised the outlook on Bolivia to negative from stable as the country continues to grapple with political uncertainty since elections in October, which was followed by the resignation of President Evo Morales and a subsequent change in leadership. The action reflects the country's higher government debt, potentially greater vulnerability to negative external shocks and persistent current account deficits draining its once large external buffers. The rating agency affirmed Bolivia's sovereign credit ratings at BB-/B.


* Moody's confirmed Vietnam's local- and foreign-currency issuer and senior unsecured ratings at Ba3, citing the government's "enhanced attention" to upcoming payments of debt obligations after a delay in payments that triggered a two-month-long review for downgrade. The outlook is negative, reflecting the agency's view of persistent risks that the Vietnamese government will again delay on paying debt obligations.

* Fitch changed the outlook on Macao to negative from stable, citing the Asian territory's growing economic, financial, and socio-political ties with mainland China, where economic growth is expected to weaken. Fitch affirmed Macao's issuer default ratings at AA/F1+, citing relatively distinct economic policies and business and regulatory environments between the mainland and the semiautonomous territory.

* Fitch revised the outlook on Sri Lanka to negative from stable, citing mounting risks to debt sustainability from a major shift in fiscal policy and the potentially wide range of tax cuts announced by new President Gotabaya Rajapaksa. The rating agency affirmed the country's issuer default ratings at B/B.

* Fitch affirmed India's issuer default ratings at BBB-/F3, citing a relatively strong medium-term growth outlook and external resilience, offset by high public debt, a weak financial sector and lagging governance indicators. The outlook is stable.


* Fitch revised the outlook on Nigeria to negative from stable, saying a sharp devaluation of the naira under the government's current policy framework would trigger macroeconomic volatility and weaken the country's key credit metrics. The rating agency affirmed the country's issuer default ratings at B+/B.

* S&P affirmed Lebanon's sovereign credit ratings at CCC/C, with a negative outlook, citing timely debt repayments by the government despite significant funding pressures and the central bank's imposition of foreign-exchange restrictions. The ratings action also reflects the agency's view that the measures aim to reduce U.S. dollar liabilities, which exceed the central bank's forex reserves.

* Fitch affirmed South Africa's issuer default ratings at BB+/B, with a negative outlook, citing robust macroeconomic institutions, a favorable government debt structure and deep local capital markets, offset by low growth potential, mounting government debt levels, contingent liabilities and extremely high inequality pressuring policy making.

* S&P affirmed Benin's sovereign credit ratings at B+/B, with a stable outlook, saying it expects the country's reform program to strengthen its economic activity and external and fiscal positions. The ratings are constrained by low per capita income, substantial external leverage and structural bottlenecks, S&P Global Ratings said.

* Fitch also affirmed Benin's ratings at B/B, with a positive outlook, citing moderate government debt-to-GDP ratio, low inflation and robust GDP growth performance, offset by low GDP per capita, limited economic diversification, a large current account deficit, a weak banking sector and vulnerability to shocks.

* Fitch affirmed Seychelles' ratings at BB/B, with a stable outlook, citing its association with IMF programs and relatively high governance indicators and per capita GDP. The ratings are constrained by the small size of the country and its vulnerability to external shocks.

* Fitch affirmed Zambia's ratings at CCC/C, citing the government's high external financing requirements, declining foreign exchange reserves, mounting government debt levels, and constrained access to domestic and external financing.

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