Fitch Ratings has affirmed common themes that have driven sovereign ratings in the last few years will dominate again in 2019, including commodity price fluctuations, reductions in imbalances following the Eurozone and global financial crises; political and geopolitical developments; as well as changes in sovereign financing conditions.
Likewise, slowing economic growth in some countries may bring
fiscal concerns back to the fore depending on policy responses and governments' starting public finance positions.
"Sovereign risks in 2019 center on the tightening of global financial conditions, potential changes in trade policies that increase impediments to the flows of goods and services across borders, and heightened, or unexpected, political and geopolitical risks that quickly dominate the policymaking environment and market conditions,"
managing director James McCormack expressed.
For the first time since the mid-2000s, Outlooks for both developed- and emerging-market sovereigns are roughly balanced between Positive and Negative, providing no clear directional indication of rating changes in the coming 12-18 months.
Furthermore, sovereigns with a Stable Outlook entering 2019 account for 75% of the portfolio, in line with the 10-year average.
"2018 had the fewest rating actions since 2007, at less than 20, but we would expect to see a return to a more normal range of 20-30 actions in 2019, assuming there are no unforeseen
shocks," the credit rating agency indicated.
Rating Distribution: Dominated by the 'B' Category
The fall in commodity prices in 2014 and continued growth in the number of newly rated sovereigns in Sub-Saharan Africa have led to a marked expansion of the 'B' category.
Nearly 30% of sovereigns are rated in this lowest category, and Outlooks in place do not signal a meaningful change in the category distribution of ratings in 2019.
With Austria (AA+) and Finland (AA+) on Positive Outlook, the 'AAA' category is likely to expand from its all-time low of 11. These would be the first two sovereigns to regain 'AAA' after having been downgraded.
Editor's note: Based on information provided by Fitch Ratings.
(END) NDP/DTK/MVB