EMEA emerging market sovereign debt-to-GDP ratio to rise over COVID-19

Since the start of 2020, S&P has downgraded 21 sovereigns globally

  
Businessman Using Laptop On Desk In Office. Image used for illustrative purpose.

Businessman Using Laptop On Desk In Office. Image used for illustrative purpose.

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The fallout from the coronavirus pandemic on domestic demand and international trade will raise EMEA emerging-market government ratios of debt-to- GDP a median 8.2 percentage points in 2020, S&P Global Ratings said in a report.

S&P rates 53 emerging market sovereigns in the EMEA region. These sovereigns entered 2020 with higher public and private debt than in the run-up to the global financial crisis according to the ratings agency.

Since the start of 2020, S&P has downgraded 21 sovereigns globally (of the total 135 rated sovereigns). Ten of these downgrades were in emerging EMEA.

“While our house view is that by the end of next year a vaccine for the current strain of the virus will be broadly available in developed economies, enabling infection rates to converge rapidly toward zero, the possibility of lower access to a vaccine in some emerging sovereigns could delay the recovery,” the report said.

Despite the recent recovery in capital inflows into emerging markets, the ratings agency believes that pressure on macroeconomic fundamentals and therefore ratings are likely to persist into 2021 and 2022.

“For emerging EMEA sovereigns, net negative outlooks currently stand at negative 9 versus negative 1 at end-2019, meaning roughly 1 of 6 ratings has a negative outlook, compared with 1 of 4 for all emerging countries,” the report noted.

MENA region

In the first six months of the year, the net balance of negative outlooks in MENA declined from negative 1 to negative 3, the report said. Oman remained on a negative outlook, as did two Emirates, Ras Al Khaimah and Sharjah.

The ratings agency lowered the rating on Kuwait, Lebanon, Oman, and Sharjah.

(Writing by Gerard Aoun; editing by Seban Scaria)

(gerard.aoun@refinitiv.com)

#EMEA #GDP #COVID19 #ECONOMY #DEBT

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