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Global Sovereign Rating Trends: Midyear 2019

Global Sovereign Rating Trends: Midyear 2019

(Editor's Note: S&P Global Ratings publishes a global sovereign ratings outlook twice a year, including rating and outlook trends as well as sovereign-specific summaries. See also our regional overviews, published in July of 2019. You will find the current set of sovereign trend publications and videos on

Chart 1


Chart 2


Rating Trends

The key risks for sovereign ratings over the second half of the year are geopolitical and trade disputes as well as the increase in populism that will undermine political cohesion and policy predictability.  

In addition, the shift to a more relaxed monetary stance by most central banks in the developed world continues to support sovereign creditworthiness globally, but more so in the emerging markets. Less than a year ago, the question was not so much "when" the next tightening in monetary policy was coming but by "how much" and "how many times." Today's reality shifted almost 180 degrees, with market forecasts going from one to three U.S. Federal Reserve rate cuts over the reminder of the year. Low--and even negative--interest rates in many developed market sovereigns will likely continue to sustain sovereign debt dynamics and liquidity in the asset class over the next six to nine months.

In this context of volatility in the flow of credit, which will continue to take a large share of our attention when assessing ratings over the next six to nine months, the most immediate concerns are domestic political dynamics and geopolitical tensions. On July 1, 2019, S&P Global ratings published its top global risks affecting credit conditions across all asset classes (see link to "Trade Casts A Global Shadow,"

Midyear 2019 Outlook: Tipping Negative

  • S&P Global Ratings rates 134 sovereigns globally (see chart 3).
  • Overall sovereign ratings remain at least one full notch below 2008 (see chart 4).
  • The overall rating outlook in the portfolio is stable, with a slight bias toward the negative over the next six months (see chart 5).

Chart 3


Chart 4


The negative trend is more pronounced in Latin America, the Middle East, and Africa (see chart 5), where we see the highest concentration of negative outlooks globally because domestic political challenges weigh heavily on economic expectations and external and fiscal risks have risen.

In Europe and Asia-Pacific, on the other hand, the trend is more positive, and the number of positive rating actions and outlook revisions have outnumbered negative actions in the first half of 2019, which we expect in the second half of the year as well.

Chart 5


Regional Outlooks

Sovereigns With Positive Or Negative Outlooks Or CreditWatch Placement (July 19, 2019)
Positive Negative



Bosnia and Herzegovina






















Costa Rica





New Zealand

Europe, The Middle East, And Africa (EMEA)

Whereas, in developed Europe, the U.K. and Italy have negative outlooks, we still have a more optimistic outlook about some pockets of the eurozone and Eastern Europe. In addition, our outlooks in the Middle East and Africa carry a heavy negative outlook concentration.  EMEA has the highest concentration of rated sovereigns. Of the 134 sovereigns that we rate, 82 are in EMEA. With a large and diverse group of sovereigns comes a wide range of economic development characteristics and credit trends.


Positive outlooks still exceed negative ones in the eurozone.   There are currently three positive outlooks for Eurozone sovereigns--in Greece, Malta, and Spain--in light of more solid growth and budgetary consolidation prospects. Offsetting these is one negative outlook, on a far larger economy, Italy.

U.K. and the Channel Islands (Guernsey and Jersey)

All have negative outlooks.   These reflect the unique (and difficult to quantify) macroeconomic risks posed by a potential "No Deal" Brexit and the threat it poses to economic growth in the U.K.

Commonwealth of Independent States and Central and Eastern Europe

Of the six positive outlooks S&P Global Ratings currently maintains on EMEA sovereigns, the majority (four) are on countries in Central or Eastern Europe or post-Soviet republics (part of the Commonwealth of Independent States).  These include Bosnia, Bulgaria, Georgia, and Serbia. Moreover, all of the sovereign upgrades in emerging EMEA so far this year have taken place in Central Europe: We upgraded Hungary to 'BBB' in February, followed by Croatia, to 'BBB-' in March.

Middle East and North Africa (MENA)

Our balance of outlooks in EMEA is most negative for MENA.   With the exception of Egypt (which was upgraded both in 2018 and 2012), we haven't taken a positive rating action in MENA since the December 2009 upgrade of Lebanon to 'B'. (The foreign currency long-term rating is now 'B-'.)

Our baseline scenario is that tensions between the U.S. and Iran in the Arabian Gulf will not lead to military conflict and that the Strait of Hormuz will remain open to global trade (see "U.S.-Iran Tensions Could Drag On Investor Confidence And Sovereign Ratings In The Gulf," published July 22, 2019). We have not changed any of our economic projections or our ratings in the region as a result, but growth should remain subdued for the remainder of 2019.

Sub-Saharan Africa

Sub-Saharan Africa is the region with the highest concentration of single 'B' category sovereign ratings.   Fiscal and debt-financing pressures persist, and the average debt burden in the region has increased substantially since 2011. Debt service costs in the region are historically high, partly because of increased commercial borrowings as well as new, often more expensive, lenders such as China.


Since December 2018, we have taken several positive rating actions in the region, and we expect the ratings in Asia-Pacific to remain relatively stable for the remainder of the year.   Since December 2018, we have upgraded Vietnam to 'BB', Indonesia to 'BBB' and The Philippines to 'BBB+'. All but two sovereign ratings (New Zealand and Japan, which have a positive outlook) carry stable outlooks.

While U.S.-China tensions aren't going away any time soon, in our view the likelihood of an abrupt increase in tariffs has receded for now, and lower interest rates in developed markets have reduced the risks of capital outflows from emerging Asian markets.

Finally, policy uncertainties have moderated following a series of recent elections across the region. But, if tensions in the Middle East worsen, parts of Asia that depend on imported sources of energy could be hit.


U.S. and Canada

In the U.S., a recent agreement on the budget to suspend the debt ceiling until mid-2021 diminishes short-term political uncertainty.   With the economy still performing strongly, we have a stable outlook heading into the national elections in 2020.

For Canada, we expect continuity in economic policies after the upcoming national elections later this year.   Our base case is that regardless of whether the incumbent liberal party wins, Canada's overall macroeconomic framework will remain stable.

Latin America

We have negative outlooks on four sovereigns in the region, making Latin America relatively the most exposed region to negative ratings actions over the next six to nine months.  The Latin American and Caribbean region is likely to show subdued economic performance this year, largely reflecting domestic economic weaknesses in many countries. The reasons for this performance vary from country to country, but the common denominator across the region is a deterioration of the political landscape that has delayed an appropriate reaction to adversity.

We expect that low interest rates internationally will support capital flows into the region, reducing liquidity risks. Domestic political challenges--more than external factors--will determine the immediate future of sovereign ratings in the region, including in the large countries such as Brazil, Mexico, and Argentina.

Related Research

  • EMEA Emerging Markets Sovereign Rating Trends Midyear 2019, July 26, 2019
  • Asia-Pacific Sovereign Rating Trends Midyear 2019, July 25, 2019
  • Americas Sovereign Rating Trends 2019, July 25, 2019
  • European Developed Sovereign Rating Trends Midyear 2019, July 25, 2019
  • Middle East And North Africa Sovereign Rating Trends 2019, Jan. 15, 2019
  • Emerging Markets Sovereign Rating Trends 2019, Jan. 14, 2019
  • Eurozone Sovereign Rating Trends 2019, Jan. 14, 2019
  • Asia-Pacific Sovereign Rating Trends 2019, Jan. 14, 2019
  • Americas Sovereign Rating Trends 2019, Jan. 14, 2019
  • Central And Eastern Europe And CIS Sovereign Rating Trends 2019, Jan. 14, 2019
  • Sub-Saharan Africa Sovereign Rating Trends 2019, Jan. 14, 2019
  • Sovereign Ratings List, Jan. 7, 2019
  • Sovereign Ratings Score Snapshot, Jan. 7, 2019
  • Sovereign Risk Indicators, Dec. 13, 2018; a free interactive version is available at
  • Global Sovereign Rating Trends: Third-Quarter 2018, Oct. 3, 2018
  • Global Sovereign Rating Trends Midyear 2018, July 16, 2018
  • 2017 Annual Sovereign Default Study And Rating Transitions, May 8, 2018
  • Sovereign Debt 2018: Global Borrowing To Remain Steady At US$7.4 Trillion, Feb. 22, 2018
  • Global Sovereign Rating Trends 2018, Jan. 10, 2018
  • 2016 Sovereign Ratings Update: Outlook And CreditWatch Resolutions,
  • 2016 Sovereign Ratings Update: Outlook And CreditWatch Resolutions, April 18, 2017

This report does not constitute a rating action.

Primary Credit Analyst:Roberto H Sifon-arevalo, New York (1) 212-438-7358;
Secondary Contacts:Frank Gill, Madrid (34) 91-788-7213;
Joydeep Mukherji, New York (1) 212-438-7351;
KimEng Tan, Singapore (65) 6239-6350;
Marko Mrsnik, Madrid (34) 91-389-6953;
Trevor Cullinan, Dubai (971) 4-372-7113;
Karen Vartapetov, PhD, Frankfurt (49) 69-33-999-225;
Ravi Bhatia, London (44) 20-7176-7113;
Johanna Melinder, Stockholm + 46 84 40 5926;

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