DBRS Morningstar Releases Sovereign Rating Review for 2019

DBRS Morningstar released a Sovereign Rating Review, covering rating actions taken between January 1 and December 19, 2019. The review is in the form of a digest for easy navigation, and includes a brief summary of regional developments. For each sovereign government rated by DBRS Morningstar, the digest shows the rating trajectory during 2019, the last rating action, the last rating/trend change, and our current rating drivers. Also, it lists the sovereign team’s published research.

European sovereign ratings have remained on an upward trajectory in 2019 in spite of weak growth in the Euro area as a whole, driven by the strong economic and fiscal performance of several lower rated sovereigns (A category and below). In the Americas and Asia, downward pressures have been more evident as governments and central banks grapple with the effects of the Chinese and US slowdowns, weaker commodity prices, trade tensions and a strong dollar. Fiscal outlooks have generally deteriorated across all regions, but Europe remains on a stronger footing. Across all regions covered by DBRS Morningstar, ratings in the AAA and AA categories have remained unchanged during 2019, reflecting the relative policy stability and shock-absorption capabilities of the highest rated sovereigns.

A few rating actions worthy of note:
-- DBRS Morningstar confirmed its rating on the U.K. at AAA with a Stable trend, a position that we have maintained throughout the drawn-out political paralysis surrounding Brexit;
-- Argentina was downgraded on August 30 following the government’s announcement that payments would be deferred on short-term obligations. Argentina’s ratings remain at CC, Under Review with Negative implications (URN), as the authorities are planning a “voluntary” debt rescheduling that is likely to meet DBRS’s definition of default.
-- Greece, which was upgraded to BB (low) during 2019, also has a Positive trend as the new government seeks to accelerate the structural reform agenda, including cleaning up the banks.
-- The trend was changed to Negative on China’s A (high) rating, reflecting the downside risks associated with a prioritization of near-term growth objectives over the need to curb credit growth.
-- The trend on Mexico’s BBB (high) ratings was changed to Negative, reflecting DBRS Morningstar’s view that Mexico’s medium-term growth outlook has weakened, due largely to policy actions taken by the López Obrador administration.
-- Spain has a Positive trend reflecting DBRS Morningstar’s view that its solid economic growth and steady improvements in public finances should continue to underpin its credit metrics despite the political uncertainty.

The digest Sovereign Rating Review 2019 is available at www.dbrs.com.

For more information on sovereign ratings, visit www.dbrs.com or contact us at [email protected].