European Sovereign Risk Ratings Rebound
November 26, 2015 | IHSEstimated reading time: 3 minutes
In this year’s third quarter, rating downgrades enveloped a broader range of commodity exporters than ever before, but Europe is seeing a ratings rebound, according to a new study from IHS Inc., the leading global source of critical information and insight.
The study, conducted by IHS Global Insight’s sovereign risk team, compares and assesses every sovereign worldwide across ratings agencies and fills in the industry’s long-neglected market space of short-term sovereign credit risk.
“Negative rating actions continued to predominate in Q3, with 43 downgrades and only 26 upgrades,” said Jan Randolph, director of sovereign risk at IHS Global Insight. “Significantly, this negative trend has now extended to other commodity producers, with Latin America and Africa worst affected in Q3-2015 with 14 downgrades in each region.”
Europe’s renewed vigor
Among the 17 upgrades in Europe during Q3 2015 were Ireland, Slovenia, Cyprus, Latvia, Portugal, Bulgaria, Malta and Iceland. The European periphery ratings rebound first began in 2013, led by Ireland, Spain and then Portugal.
“All 17 upgraded countries have shown a renewed vigor of GDP growth, and that has been hugely supportive of the ratings rebound,” Randolph said.
Asia’s rising star: Philippines
While Europe may be the region with the most good news, the Philippines is shining bright in Asia.
“The Philippines has been on a long ratings upgrade trajectory over the last few years,” Randolph said. “The key driver to these upgrades has been successively strong current account surplus generation, with new found sources in export earnings other than workers' remittances and lower energy import bills. However, the latest upgrade in Q3 rests on improved governance standards and reforms enhancing competitiveness under the Aquino administration. A significant improvement in gauges of corruption, transparency, and economic freedom underpinned the improved governance rationale for this outlook upgrade to positive; while the investment grade remained at BBB- or 40/100.”
Latin America’s energy exception: Bolivia
Most significant energy producers in South America (Venezuela, Colombia, Argentina and Brazil) and the Caribbean (Trinidad and Tobago) have experienced some negative rating action over the last 12 months, influenced by energy and commodity prices under pressure since mid-2014.
The sole exception to this negative rating impact from the falling commodities trend has been Bolivia. In relative terms, Bolivia is a more recent energy exporter, whose increased capacity and production is not set to peak until 2019. Many years of hydro-carbon, especially gas-based economic growth and current account surplus generation, has transformed Bolivia's liquidity and solvency metrics for the positive, such that external and domestic debt has been lowered to modest levels.
“Foreign exchange reserves now comfortably exceed public external debt; making the country a 'net creditor nation',” Randolph said. “Bolivia's economy now faces the sharp drop in hydrocarbon prices, but from a position of relative strength.”
Page 1 of 2
Suggested Items
Flex Announces Upcoming Changes to Its Board of Directors
05/07/2024 | FlexFlex announced that consistent with its succession plan, Michael D. Capellas, non-executive Chair of the Board of Directors of Flex, has informed the Board of his decision not to stand for re-election to the Board at the company's 2024 Annual General Meeting of shareholders to be held on August 8, 2024. Mr. Capellas has served on the company's board for 10 years, including as Chair since 2017, during which time he played a key role in building Flex's reputation as a trusted global technology, supply chain and manufacturing solutions partner and driving the company's success.
Europlacer Presents New Range of iineo SMT Placement Machines.
05/01/2024 | EuroplacerFor more than 15 years, the Europlacer iineo placement machines have made their mark on the SMT industry with unique features and unrivalled flexibility. Today, Europlacer announces the launch of the second generation iineo.
Incap US Hosts Annual Food Drive
04/30/2024 | IncapIncap US recently concluded its annual food drive, a tradition aimed at supporting the Greater Washington County Food Bank. This year marked the fourth year of the initiative, and we couldn’t be prouder of the collective effort that was made to its success.
Scanfil Uses Employee Engagement Survey to Improve
04/30/2024 | ScanfilOnce a year Scanfil arranges Employee Engagement Survey (EES) in order to get valuable insight from its employees. In EES all employees are invited to share their opinion, bring ideas for improvements, and contribute to making Scanfil a better place to work.
epoxySet Introduces EO-20E – Versatile, Electrically Conductive Epoxy
04/29/2024 | epoxySetepoxySet produces EPOXIOHM EO-20E an industry established, reliable electrically conductive epoxy designed for solder replacement, chip bonding and other intricate electronic and optoelectronic assemblies. This creamy paste has a an easy to use 1:1 mix ratio with a 48 hour work time.