Fixed Interests

Global GDP is collapsing as the COVID-19 crisis escalates rapidly. Tony Stringer, Chief Operating Officer, Sovereigns and Brian Coulton, Chief Economist, discuss Fitch’s latest Global Economic Outlook - Crisis Update.

With the coronavirus crisis taking an extraordinarily heavy toll on the world economy, Tony Stringer, Chief Operating Officer, Sovereigns and Brian Coulton, Chief Economist, discuss the latest Global Economic Outlook forecasts and downside scenarios.

In the latest edition of Fixed Interests, Michele Napolitano, Head of the Western Europe team, and Alex Muscatelli, from the Western Europe team and Primary Analyst for Ireland, discuss the implications of Ireland’s recent election for our analysis, and the outcome of our recent rating review of Ireland.

What are the economic and political implications of the recent social protests in Chile and Colombia, and what does the future hold? In the latest edition of Fixed Interests, Shelly Shetty, Co-Head of Sovereigns-Americas and Richard Francis, Director of Sovereign Ratings and Primary Analyst for Colombia and Chile, discuss how the aftershocks of the recent social unrest impacted the growth outlook and political profile of each of the countries. The overall impact was much more profound in Chile, leading Fitch to significantly revise its previous baseline growth and fiscal forecasts. In contrast, the impact on Colombia’s growth was relatively benign but there were some negative fiscal implications, an area where Fitch already had concerns given the rise in debt to GDP over the past five years. Despite the recent fall in the intensity of the protests, risks and uncertainties remain.

Sovereigns in the Commonwealth of Independent States (CIS) and Black Sea Region have experienced positive rating momentum recently, with four upgrades in 2019. Paul Gamble, Head of Emerging Europe Sovereign Ratings, and Erich Arispe, Senior Director on the Sovereign team, discuss the factors behind the improvement in the regions rating, and why Fitch believes that further upgrades may be tougher to achieve.

Asia’s Frontier Markets have great potential, but are also prone to external financing pressures. Stephen Schwartz, Head of Asia-Pacific Sovereign Ratings, moderates a discussion with Sagarika Chandra and Jeremy Zook, Associate Directors on the Sovereigns team, to discuss the ratings outlook for Sri Lanka, Pakistan and Vietnam. Sagarika explains the rationale for the recent revision of Sri Lanka’s outlook to negative, in contrast to Vietnam’s positive outlook. Jeremy discusses progress being made to strengthen Pakistan’s public and external finances, and what it would take for Pakistan’s rating to move higher.

The relative stability of the service sector - which accounts for 70% of GDP in the advanced economies – should help global growth to stabilise next year after a sharp leg down in 2019. Manufacturing has been hit much harder by the trade war, the related decline in business investment and the broader emerging market slowdown and we do not expect any rebound, even if signs are emerging that the downturn maybe starting to ease. Service sector output is much more closely tied to consumer spending, where tight labour markets and solid household income growth are supporting steady growth.

Demographic trends such as declining or rapidly expanding populations, a bulging youth cohort or pronounced ageing can create risks to sovereign creditworthiness. Key channels of impact include stagnant potential GDP growth, unsustainable pension systems and public debt, and risks to social and political stability. Demographic forces are already affecting some sovereign ratings and Fitch Ratings believes they are likely to become a more important driver over the medium term.

What are the implications of Argentina’s most recent presidential election, and how will it affect the nation’s current economic uncertainty? In the latest edition of Fixed Interests, Shelly Shetty, Co-Head of Sovereigns-Americas and Todd Martinez, Primary Analyst for Argentina, discuss President-elect Alberto Fernandez’s potential fiscal policies to help stem inflation, the pending renegotiation of the IMF program, and necessary debt restructuring to avoid default and establish a sustainable financial position.

World growth forecasts have been cut across the board following the escalation in the US-China trade war in August. We now expect world growth in 2020 to fall to 2.5% , the lowest rate since 2012. Trade policy disruptions will adversely affect exports, manufacturing and business investment and there are limits as to how effective monetary policy easing will be in softening the blow.

James McCormack, Head of Sovereign Ratings and Stephen Schwartz, Head of Asia-Pacific Sovereign Ratings, provide a preview of key issues that will be discussed at Fitch’s Global Sovereign Conferences taking place in Asia, Europe and the U.S. during the weeks of September 9th and 16th. Issues include the growth implications of the China-US trade war, and policy space across Asia for stimulus, if required, in light of risks to the growth outlook. Check out the events page on Fitchratings.com for more information and conference registration.

Jan Friederich, Head of Middle East and African Sovereign Ratings, explains the key drivers behind the decision to revise the outlook on South Africa to Negative and affirm the rating at ‘BB+’ in a conversation with Stephen Schwartz, Senior Director, Sovereign Ratings. They also discuss South Africa’s economic and political outlook from a credit perspective.

As a result of political polarization, fiscal constraints, and rising tensions with the U.S. over immigration policy, Central America faces political instability; currently, three out of five countries in the region have negative outlooks. In the latest edition of Fixed Interests, Shelly Shetty, co-Head of Latin American Sovereigns, and Carlos Morales, Director of Sovereign Ratings, discuss the latest trends in Central America Sovereigns as well as the more common themes behind some of the recent negative rating actions.

Michele Napolitano, Head of Western Europe Sovereigns, and Alex Muscatelli, Director, discuss the failure of Pedro Sanchez to win a confidence vote in the Spanish parliament on 25 July. This could delay fiscal consolidation measures scheduled for 2020, although this would not significantly change our debt-to-GDP projections. The increase in political instability in recent years has not damaged the economic recovery that has supported Spain’s fiscal adjustment. However, a cyclical slowdown will lessen the role of GDP growth in deficit reduction.

Stephen Schwartz, Head of Asia-Pacific Sovereign Ratings, and Thomas Rookmaaker, Director and Lead Analyst for India of Sovereigns Ratings, discuss India’s fiscal and growth outlook, along with the key drivers of the sovereign rating.

Tony Stringer, Managing Director, Global Sovereigns and Ed Parker, Head of EMEA Sovereign Ratings discuss Sub-Saharan African (SSA) debt, noting government debt/GDP has risen steeply in SSA, with the median of 19 Fitch-rated sovereigns doubling since 2012 to 56% at end-2018. Fitch believes that SSA sovereigns have used some of the fiscal space afforded by the Highly Indebted Poor Countries initiative to boost investment, GDP growth and human development.

Tony Stringer, Managing Director, Global Sovereigns and Brian Coulton, Chief Economist, say threats to the global growth outlook from trade protectionism have become much more significant in recent months. The breakdown of US-China trade negotiations, the recent use of a US tariff threat to pressure Mexico to change migration policies, and the rising chance of a no-deal Brexit all raise the possibility of disruptions to global trade that could have a much bigger impact on the world economy than anything seen over the course of 2018.

Shelly Shetty and Charles Seville, Co-Heads of Sovereigns Ratings for the Americas, discuss the recent downgrade of Mexico's credit ratings. Key drivers for the rating action include liability of Pemex's deteriorating credit profile, poor economic growth performance exacerbated by trade tensions, and domestic policy uncertainty from the new administration.

Shelly Shetty, Co-head of Sovereigns—Americas, and Todd Martinez, Primary Analyst for Argentina, discuss the Negative Rating Outlook for the country against a backdrop of continuing high inflation, economic contraction, as well as a competitive presidential election in October.​

Jan Friederich, Head of Middle East & Africa Sovereign Ratings, and Krisjanis Krustins, Director focusing on GCC sovereigns, discuss the fiscal trends in the region, the risks stemming from the oil market, the credibility and direction of reforms and the outlook for sovereign ratings.

In the latest Fixed Interests Podcast,Tony Stringer, Managing Director, Global Sovereigns and Brian Coulton, Chief Economist, discuss the Global Economic Outlook for 2019, noting global growth prospects have deteriorated significantly since December 2018.

Shelly Shetty, Co-head of Sovereigns—Americas, and Richard Francis, Primary Fitch Analyst for Colombia, discuss the fiscal and growth challenges for Colombia and how the new government is trying to tackle those issues.​

Tony Stringer Managing Director, Global Sovereigns and Erich Arispe, Director, Fitch Ratings, discuss the Positive Outlook for Russia which reflects continued progress in strengthening the economic policy framework underpinned by a more flexible exchange rate, a strong commitment to inflation-targeting and a prudent fiscal strategy. This policy mix has increased the economy's resilience to shocks and helped preserve macroeconomic and financial stability despite the heightened sanctions' risk

Public finances in several developed markets look exposed when the next recession eventually strikes, with potential negative consequences for some sovereign ratings.

Persistently high fiscal deficits leading to rising debt burden and high government financing needs has led Fitch to downgrade Costa Rica. Charles Seville, Head of North America Sovereigns, and Carlos Morales, Director, Sovereigns, discuss Costa Rica in more detail, exploring the reasons behind the downgrade and how this negative outlook may be resolved.

Tune into our latest Fixed Interest podcast with Brian Coulton, Chief Economist and Tony Stringer, COO, Global Sovereigns Group, who discuss what's in store for the global economy in 2019. For more content providing in-depth insight into credit in 2019, including reports, videos and webinars visit our dedicated Credit Outlook page https://your.fitchratings.com/outlooks-2019.html

Protectionist US trade policies have now reached the point where they are materially affecting what remains a strong global growth outlook, with the US-China trade battle prompting us to downgrade our 2019 global GDP forecast, says Fitch Ratings in its new Global Economic Outlook (GEO).

Tune into the latest Fixed Interests and listen to James McCormack, Global Head of Sovereigns, and Brian Coulton, Chief Economist, discuss how global growth prospects remain robust despite rising trade tensions and 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. While China’s growth rate is holding up better than expected so far in the face of slowing credit growth; Russia and Brazil continue to recover slowly.

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 highlight that political and governance issues were the driving or supporting factors in a cumulative 47% of sovereign downgrades, rating crises, or defaults from 1997 to present. They point to current political events that may negatively affect ratings such as: • Activity in the Korean Peninsula • The Gulf and wider Middle Eastern tensions • US withdrawal from the Iran nuclear deal • Global oil prices

Tune into the latest Fixed Interests and listen to James McCormack, Global Head of Sovereigns & Supranational Group, Fitch Ratings and Andrew Fennell, Director, Sovereigns, Fitch Ratings, discuss Fitch’s recent affirmation of China’s ‘A+’ rating. James and Andrew explore current policy settings, the growth outlook, and provide insights into the deleveraging story whilst giving Fitch’s view on whether household debt will become a credit issue.

The global economy is experiencing boom-like growth conditions and central banks are becoming less cautious as inflation risks rise, according to Fitch's latest "Global Economic Outlook" (GEO). The US, eurozone and China are all likely to grow well above trend in 2018 and global economic growth is set to remain above 3% for three consecutive years until 2019, a performance not achieved since the mid 2000s.

The Eurozone Capital Expenditure (Capex) recovery had initially been a disappointment in the aftermath of the Eurozone crisis, lagging consumption and wider GDP. But the capex outlook is now looking a lot brighter and has been a key factor behind Fitch’s recent upgrades to its Eurozone GDP forecasts.

On the latest Fixed Interests, senior members of Fitch’s Economics and Sovereign teams discuss potential growth rates of the largest emerging markets. Analysis highlights the importance of demographic factors and investment rates, placing India ahead of China over the next 5 years with projected GDP growth of 6.7% versus 5.5%.

Monica Insoll, Head of Credit Market Research and Joseph Cass, Director, Investor Development, provide a 10 minute high-level overview of Fitch Ratings’ Global Credit Outlook report which covers all rated sectors and regions. They identify the main macro issues that will drive credit trends over the next 12 to 24 months, focusing on what factors are most likely to drive rating changes in 2018.

Global growth momentum remains strong and is likely to be sustained by an increasingly positive outlook for investment, says Fitch Ratings in its latest Global Economic Outlook (GEO).

Analytical Chief Operating Officer Tony Stringer and Managing Director Ed Parker discuss, in our latest Fixed Interests Podcast, the lessons for countries experiencing multiple downgrades or post-crisis upswings.

"Our forecasts imply something of a 'sweet spot' for the global economy in 2017 and 2018 with above-trend growth and still highly accommodative global monetary policies. However, this is not a pattern we expect to persist into 2019 and beyond as output gaps close in advanced economies and monetary policy support is withdrawn," said Brian Coulton, Fitch's Chief Economist.

Monica Insoll, Fitch Ratings' Head of Credit Market Research and Joseph Cass, Director, Business and Relationship Management, discuss the themes of Fitch Ratings' latest report: The Credit Outlook 3Q17 (QE and World Growth Buoy Global Rating Outlooks).

In our latest Global Economic Outlook James McCormack, Fitch Ratings Global Head of Sovereign Ratings and Brian Coulton, Fitch Chief Economist, discuss growth revisions in 2017 which are, for the most part, positive. There were 12 upgrades to growth forecasts of the 20 countries examined.

Monica Insoll, Fitch Ratings Head of Credit Market Research, talks with Michael Larsson, Director of Credit Market Research, about how European credit markets are being impacted by the improving economy, political risk, and ECB QE programmes.

James McCormack, Fitch Ratings Global Head of Sovereigns, and Brian Coulton, Fitch Chief Economist, discuss US monetary policy and the implications of the Fed's recent rate hike.

Monica Insoll, Head of Credit Market Research and Joseph Cass, Associate Director, Investor Development, provide a 10 minute high-level overview of Fitch Ratings’ Global Credit Outlook report. They identify the main macro issues that will drive credit trends over the next 12 to 24 months, focussing on what factors are most likely to drive rating changes during 2017.

Monica Insoll, Fitch Ratings Head of Credit Market Research and Joseph Cass, Associate Director, Investor Development at Fitch Ratings discuss major themes in the European corporate and financial investment-grade and high-yield bond markets including issuance drivers and trends, the impact of QE, rating and overall credit quality trends and the outlook for 2017.

James McCormack, Fitch Global Head of Sovereigns and Brian Coulton, Fitch Chief Economist discuss a few of the major themes in the global economy, including: * The Fed, the dollar and the fiscal reflation story in the United States. * European dependence on loose monetary policy. * China housing market. * Potential changes in US trade policy towards China