S&P downgraded almost three times as many countries’ sovereign credit ratings as it upgraded in 2016, and the ratings agency has predicted that the trend is likely to accelerate this year.
Of the 130 countries with a rating from S&P, 30 started 2017 with a “negative”outlook compared with only seven with a positive outlook.
A negative or positive outlook implies at least a one-in-three chance of a change to a sovereign’s credit rating in the next two years if it is investment-grade, or next one year if it is speculative-grade.
Since the start of the financial crisis in 2008, the average long-term sovereign credit rating has fallen to between BBB and BBB-, the lowest investment-grade rung on the ratings ladder.
In emerging markets in particular, the picture is even bleaker, with negative outlooks outnumbering positives by six to one (though this is still an improvement on the situation in June).
However, one bright point came from the eurozone, which S&P said has now “overcome the acute phase of the crisis”. Having accounted for “almost the entire global negative outlook bias” at the lowest point in the eurozone crisis, no country in the currency union currently holds a negative outlook.