S&P sees more sovereign rating downgrades this year

MANILA, Philippines – Standard and Poor’s Ratings Services believes sovereign downgrades are likely to outpace upgrades this year amid the normalization of interest rates in the US and the economic slowdown in China.

In its latest report called “Global Sovereign Rating Trends 2016,” the debt watcher said 25 out of the 131 countries rated globally have a negative outlook while only eight have a positive outlook.

The rest of the countries rated by S&P, including the Philippines, have a stable outlook.

S&P chief rating officer for sovereign ratings Moritz Kraemer said the outlook balance has dropped to -17 in end-December from the seven-year high of -4 in June 2015.

“This constitutes the most negative six-monthly swing in the outlook balance since December 2008,” Kraemer said.

According to Kraemer, the outlook distribution suggests that negative rating actions are likely to continue to outnumber positive actions over the coming 12 months.

“It also indicates that the dominance of downgrades is likely to accelerate this year compared to last,” he said.

S&P noted that negative outlooks have outnumbered positive outlooks since early 2008.

The second half of last year, however, has seen a reversal of the gradually improving trend in the outlook balance that had begun in 2013.

Over the past year, the outlook balance has deteriorated in all global regions except Asia-Pacific, the debt watcher said.

According to S&P, Asia continues to have a rare positive balance of +1 with a positive outlook in Indonesia and Pakistan outnumbering the negative one of Papua New Guinea.

The international credit rating agency said the deterioration in outlook balance was most pronounced in the Middle East, Commonwealth of Independent States, and Africa.