Russian economic gloom belied by benign debt outlook

2016 ◽  
Keyword(s):  
Credit Rating ◽  
External Shocks ◽  
Public And Private ◽  
Monetary Policies ◽  
Content Type ◽  
Domestic Debt ◽  
Capital Outflows ◽  
Fiscal Austerity ◽  
Investment Grade ◽  
Sovereign Credit Rating

Subject Russia's foreign and domestic debt position. Significance Standard & Poor's (S&P) raised its outlook for Russia's sovereign credit rating from 'negative' to 'stable' on September 16. At BB+, the agency's rating for Russia remains a notch below investment grade, as does Moody's, but S&P notes that the economy has demonstrated resilience in its response to external shocks and that plans for fiscal austerity are encouraging. The scale of Russian external debt, both public and private, is modest thanks to years of eschewing borrowing. Impacts Providing fiscal and monetary policies remain prudent, net private capital outflows are likely to be limited. Corporate ruble bonds, already enjoying some popularity among foreign investors, are likely to remain attractive. When financial sanctions are eventually lifted, some Russian companies able to repay debt will pull in foreign direct investment.

Weak growth to weigh on South Africa's credit rating

2016 ◽  
Keyword(s):  
South African ◽  
Credit Rating ◽  
Good Governance ◽  
Content Type ◽  
Rating Agencies ◽  
Presidential Succession ◽  
Capital Outflows ◽  
Weak Growth ◽  
Investment Grade ◽  
Levels Of Support

Subject Outlook for South Africa's sovereign rating. Significance Recent decisions by the three main credit rating agencies to retain South Africa's investment-grade status following their respective mid-year reviews was met with relief within business and government circles. A downgrade to junk status risked a sharp depreciation in the rand, rising debt burdens, significant capital outflows and almost certain recession. The agencies will conduct their next reviews in December. Impacts Intra-ANC factionalism linked to the presidential succession will intensify after the municipal elections in August. If the ANC loses significant levels of support in major cities, its members may blame Zuma, possibly hastening his departure. Increased censorship by the state-owned South African Broadcasting Corporation will undermine good governance. High unemployment will persist, which, together with interest rate hikes, will dampen prospects for a recovery in consumption growth.

Budget will not offset South Africa junk rating risk

2016 ◽  
Keyword(s):  
South Africa ◽  
Industrial Development ◽  
Credit Rating ◽  
Content Type ◽  
Rating Agencies ◽  
Finance Minister ◽  
Downward Pressure ◽  
Containment Measures ◽  
Capital Outflows ◽  
Investment Grade

Subject Fiscal outlook for South Africa. Significance The IMF today welcomed Finance Minister Pravin Gordhan's budget -- which was the most critical in the post-apartheid period, given the threat by rating agencies that South Africa could lose its investment grade credit rating unless it stabilises its finances. The spending plan features moderate tax increases and several cost containment measures, but these could prove insufficient. Impacts The Industrial Development Corporation's initiative to boost employment-intensive sectors will probably fail due to strict labour laws. The Land Bank's special new loan facility will help farmers hurt by the regional drought, enabling them to resume production. A 'junk' sovereign credit rating would drive significant capital outflows, placing downward pressure on the rand.

Assessing sovereign risk: the case of rich countries

2014 ◽  
Vol 6 (3) ◽  
pp. 212-225 ◽  
Author(s):  
Norbert Gaillard
Keyword(s):  
Sovereign Debt ◽  
Credit Rating ◽  
Debt Crisis ◽  
Sovereign Debt Crisis ◽  
Bond Yields ◽  
Content Type ◽  
The Great Recession ◽  
Market Participants ◽  
Investment Grade ◽  
Rich Countries

Purpose – This paper aims to shed new light on the inability of credit rating agencies (CRAs) to forecast the recent defaults and so-called quasi-defaults of rich countries. It also describes how Moody’s sovereign rating methodology has been modified – and could be further improved – to solve this problem. Design/methodology/approach – After converting bond yields into yield-implied ratings, accuracy ratios are computed to compare the respective performances of CRAs and market participants. Then Iceland’s and Greece’s ratings at the beginning of the Great Recession are estimated while accounting for the parameters included in the new methodology implemented by Moody’s in 2013. Findings – Market participants outperformed Moody’s and Standard & Poor’s in terms of anticipating the sovereign debt crisis that hit several European countries starting in 2008. However, the new methodology implemented by Moody’s should lead to more conservative and accurate sovereign ratings. Originality/value – The chronic inability of CRAs to anticipate public debt crises in rich countries is dangerous because the countries affected – which are generally rated in the investment-grade category – are substantially downgraded, amplifying the sovereign debt crisis. This study is the first to demonstrate that Moody’s has learned from its recent failures. In addition, it recommends ways to detect serious threats to the creditworthiness of high-income countries.

Russia's central bank will anticipate sanction risks

2021 ◽  
Keyword(s):  
Exchange Rate ◽  
Credit Rating ◽  
Bond Market ◽  
Secondary Market ◽  
Foreseeable Future ◽  
Foreign Reserves ◽  
Foreign Investors ◽  
Content Type ◽  
Economic Fundamentals ◽  
Sovereign Credit Rating

Significance Because the risk of sanctions was priced into Russian bond prices and the ruble exchange rate, the market reaction to the measures announced on April 15 was muted. US investors can still buy and hold OFZs and Eurobonds on the secondary market, but the prospect of further restrictions are possible. Impacts Sanctions risks will weigh down Russia's sovereign credit rating for the foreseeable future. Diminished liquidity in the bond market will make it difficult to price new Russian corporate debt, particularly for new issuers. Strong economic fundamentals and high foreign reserves will encourage foreign investors to return once uncertainty subsides.

Near-zero growth is expected in Kazakhstan in 2016

2016 ◽  
Keyword(s):  
Financial Markets ◽  
Banking System ◽  
Oil Prices ◽  
Domestic Demand ◽  
Living Standards ◽  
External Shocks ◽  
Monetary Policies ◽  
Content Type ◽  
Trading Partners ◽  
Zero Growth

Significance Low global oil prices and GDP declines in Russia and other trading partners caused a slowdown in growth in Kazakhstan in 2015 and early 2016. External shocks led to a large devaluation of the currency, hikes in inflation, and low domestic demand and industrial activity. Savers switched from tenge to dollars, and devaluation brought reduced liquidity and increased volatility in the financial markets, undermining the banking system. Impacts Falling living standards are a key political risk for President Nursultan Nazarbayev. Higher oil prices and a modest Russian recovery may offer Kazakhstan some respite. Tenge depreciation against trading partners' currencies will boost non-commodity exports. 'Dollarisation' of the economy will reduce the central bank's ability to implement monetary policies.

Another rating upgrade is likely for Hungary soon

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Banking Sector ◽  
Credit Rating ◽  
Emerging Market ◽  
Investor Sentiment ◽  
Central Banks ◽  
The Philippines ◽  
Content Type ◽  
Investment Grade

Significance Hungary thereby regains investment-grade status, albeit at the lowest level, from being downgraded to 'junk' because of doubts about the government's policies and the high public debt burden. Hungary's improving creditworthiness, underpinned by its current account surplus and deleveraging in the banking sector, contrasts with the increasing strain on Poland's credit rating. Political risk has become a major driver of investor sentiment towards emerging markets. Impacts Emerging market assets have become more vulnerable as investors reprice US monetary policy. Futures markets are now assigning a 51% probability to another rise in US interest rates at or before the Federal Reserve's July meeting. Central Europe's government bond markets are being supported by the persistently dovish monetary policy stance of its central banks. This contrasts with Latin America, where inflationary pressures are forcing many central banks to raise rates. Brazil, Turkey, Poland and the Philippines are among several countries where political uncertainty is a key determinant of asset prices.

Russia readies for long economic struggle

2015 ◽  
Keyword(s):  
Economic Policy ◽  
Credit Rating ◽  
Social Spending ◽  
Content Type ◽  
Economic Plan ◽  
Rating Agencies ◽  
European Trade ◽  
The Government ◽  
Key Industries ◽  
Sovereign Credit Rating

Significance The currency, which has fallen 14% against the dollar so far this year, fell another 3% in morning European trade, sinking below 70 to the dollar. The rate cut comes after the January 26 downgrade by international ratings agency Standard & Poor's (S&P) of Russia's sovereign credit rating to junk status (from BBB- to BB+) and the January 28 announcement of an economic plan that will see the government spend 2.34 trillion rubles (35 billion dollars) to bolster key industries, including banks, and to boost its troubled economy particularly in the regions. As part of the measures, Moscow plans a 10% cut in the budgets of all but a handful of ministries. Defence, agriculture and social spending are spared. Impacts Discussions between liberals are not as important to economic policy as they were. Further measures to boost the economy are likely in order to forestall more rating agencies downgrading Russia to junk status. The Security Council will exert greater influence over economic policy, further marginalising economic liberals.

Inflation 'solution' should help avoid Brazil default

2016 ◽  
Keyword(s):  
Sovereign Debt ◽  
Credit Rating ◽  
Case Scenario ◽  
Current Crisis ◽  
Content Type ◽  
Rating Agencies ◽  
Primary Deficit ◽  
Political Conditions ◽  
The Government ◽  
Investment Grade

Significance Days before this announcement, the government asked Congress to approve a primary deficit of up to 96.65 billion reais (some 1.5% of GDP) for this year. The sharp deterioration in fiscal performance in recent years led the three main credit rating agencies to strip Brazil of its investment grade status between September 2015 and February 2016. A profound and prolonged recession and dysfunctional politics that make it difficult to address Brazil's fiscal shortcomings have also increased concerns over the sustainability of the country's sovereign debt. Impacts The depth of the current crisis could lead to political conditions for bolder economic reforms. However, that best-case scenario is out of reach for the current government. Even fortunate future governments would only enjoy a narrow window of opportunity to seek ambitious reforms.

Economic crisis will sustain unrest in Zimbabwe

2016 ◽  
Keyword(s):  
South African ◽  
Economic Crisis ◽  
Credit Rating ◽  
Civil Servants ◽  
Content Type ◽  
High Unemployment ◽  
Finance Minister ◽  
Fund Development ◽  
The Government ◽  
Sovereign Credit Rating

Significance Discontent over President Robert Mugabe's mismanagement of the economy is deepening, particularly over high unemployment and severe cash shortages, which have caused the government to delay paying civil servants' salaries. Impacts Pretoria's demands that Harare drop its restrictions on South African imports will likely increase bilateral tensions. Smugglers will take advantage of the region's porous borders to circumvent these rules, eg by routing goods via Mozambique. The mines and minerals amendment bill, which requires mining firms to list on the local bourse, will likely deter investment. Tensions between Finance Minister Patrick Chinamasa and leftist ministers could result in further policy reversals. Plans to gain a sovereign credit rating and issue Eurobonds to fund development will remain unrealised, at least for several years.

Vietnam anti-corruption drive may have limited success

2018 ◽  
Keyword(s):  
Credit Rating ◽  
Content Type ◽  
Rating Agencies ◽  
High Profile ◽  
Limited Success ◽  
Orderly Transition ◽  
Investment Grade ◽  
General Secretary ◽  
Standing Problem ◽  
Party Congress

Subject Vietnam's corruption crackdown. Significance Vietnam’s latest anti-corruption drive is set to target more high-profile figures. The country has a long-standing problem with institutional corruption, but critics of the ruling Communist Party of Vietnam (CPV) see its crackdowns as politically motivated. Impacts Improvements in corruption indices may convince credit rating agencies to edge Vietnam closer to investment-grade status. Greater CPV discipline may help General Secretary Nguyen Phu Trong engineer an orderly transition of leadership at the 2021 party congress. Vietnam is likely to face greater international criticism over human rights violations.

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