Fitch-rated frontier markets saw more positive than negative sovereign rating actions in 2018, partly due to higher commodity prices, Fitch Ratings says.
Some frontier markets still face challenges in the coming year, as highlighted by more recent rating actions. The nature of these challenges and relative vulnerabilities vary from region to region and sovereign to sovereign.
Of the 30 Fitch-rated frontier markets, 13 saw positive rating actions last year, compared with six negative actions. The majority were Outlook changes. The mix of upgrades and downgrades was balanced at four each.Almost three-quarters of ratings are in the ‘B’ category. Most Outlooks are Stable, and the number of Positive and Negative Outlooks is balanced (four each). But low ratings highlight persistent vulnerabilities, which may include weak public and external finances, exposure to global monetary tightening, and political risks.
Fitch said, “Rating actions were balanced in Asia in 2018. We downgraded Pakistan and Sri Lanka in December.
Both countries face external pressures and refinancing risks, and these were exacerbated in Sri Lanka by October’s political crisis.
IMF assistance may eventually be forthcoming in Pakistan, which has engaged in programme discussions, and Sri Lanka appears keen to resume its programme.
Mongolia’s July upgrade reflected improved fiscal metrics from the rise in commodity prices and progress in meeting key IMF programme targets. Continued high and stable growth rates, current account surpluses and rising FDI inflows drove Vietnam’s upgrade in May. “
0 comments: