Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Look up keyword
Like this
24Activity
0 of .
Results for:
No results containing your search query
P. 1
The Credit Outlook Sovereign Debt Worries Cloud Fragile Economic Recovery

The Credit Outlook Sovereign Debt Worries Cloud Fragile Economic Recovery

Ratings: (0)|Views: 141 |Likes:
Published by melvine
The Credit Outlook Sovereign Debt Worries Cloud Fragile Economic Recovery
May 2010
The Credit Outlook Sovereign Debt Worries Cloud Fragile Economic Recovery
May 2010

More info:

Published by: melvine on May 18, 2010
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

07/02/2013

pdf

text

original

 
Credit Market Research
 
 www.fitchratings.com 18May2010
 
GlobalSpecial Report
The Credit Outlook
 
Sovereign Debt Worries Cloud Fragile Economic Recovery 
Summary 
The worst of the most severe recession since the 1930s is fading — stabilisation isoccurring and a slow recovery is in progress. Following the financial crisis‐inducedrecession, the many aggressive fiscal and monetary efforts by governments aroundthe world appear to have been successful in kick‐starting economic activity. FitchRatings believes the turning point for the world economy was reached in mid‐2009,and the agency has revised upwards its forecasts for growth in the major advancedeconomies to 1.9% for 2010. Ratings are stabilising across all sectors, apart from instructured finance and high‐grade sovereigns.However, the economic recovery is fragile, and needs to move on to a self‐sustaining phase. The recovery has been driven by temporary factors — the reboundin world trade, a slowdown in inventory de‐stocking, and fiscal policy easing. Thenecessary trigger of increased investment is hampered by the continueddeleveraging, constrained credit availability, and uncertain labour market prospectsaffecting the consumer and housing segments, although prospects for a pick‐up inprivate investment — especially in the US — are brighter.The corporate sector is struggling with stubbornly high over‐capacity, which acts asa disincentive for capex. In the public sector, which has shouldered much of thefinancial burden of the problems in the private sector, large budget deficits areforcing policy back into restraint mode (
Government Debt/GDP 
chart), and placingincreasing pressure on high‐grade sovereign creditworthiness.Across Fitch’s rated universe, the developed market base‐case assumption is forslow and anaemic recovery. Hence, the single most significant risk to ratings is a“double‐dip” recession. This could be triggered by the upcoming fiscal tighteningcycle which will be the greatest in history. However, Fitch expects its effect ongrowth to be delayed due to lags in the economy.
0204060801001201995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e 2010f 2011f(Year)Mature economies EM(%)
 
Government Debt/GDP
 
Source: Fitch
 
 Analysts
Mon
i
ca Insoll+44 20 7417 4281monica.insoll@fitchratings.comMariarosa Verde+1 212 908 0791mariarosa.verde@fitchratings.comTrevor Pitman+44 20 7417 4280trevor.pitman@fitchratings.com
 Group Credit Officers
 Gerry Rawcliffe (Sovereign; Public Financeand Financial Institutions – EMEA & APAC)+44 20 7417 7419gerry.rawcliffe@fitchratings.comEric Friedland (Public Finance ‐ US)+1 212 308 0632eric.friedland@fithcratings.comJoo‐Yung Lee (Financial Institutions ‐ US)+1 212 908 0560joo‐yung.lee@fitchratings.comEileen Fahey (Regional Credit Officer– US)+1 312 368 5468eileen.fahey@fitchratings.comAndrew Murray (Insurance – EMEA & APAC)+44 20 7417 4303andrew.murray@fitchratings.comJohn Hatton (Corporate ‐ EMEA & APAC)+44 20 7417 4283john.hatton@fitchratings.comTimothy Greening (Corporate ‐ US)+1 312 368 3205timothy.greening@fitchratings.comGlenn Costello (Structured Finance)+1 212 908 0307glenn.costello@fitchratings.comStuart Jennings (Structured Finance ‐ EMEA)+44 20 4717 6271stuart.jennings@fitchratings.comThomas McCormick (Global Infrastructure andProject Finance)+1 212 908 0235thomas.mccormick@fitchratings.com
 
Credit Market Research
The Credit Outlook Sovereign Debt Worries Cloud Fragile Economic RecoveryMay 2010
 
2OutlooksOverview 
010203040506070Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110(Quarter/year)Banks Insurance Corporates SF Sovereign Aggregate ex. SF(% of portfolio)
 
Negative Outlooks
 
Source: Fitch
Outlooks have been stabilising across most sectors since Q309. In structured finance,the continued negative trend is driven mainly by US RMBS and, to a lesser extent,US CMBS.The insurance sector outlooks have started to stabilise after a significant increasein the proportion of negative outlooks from 2008. The negative outlooks broadlyreflect the relatively high level of insurers’ exposure to volatile investment marketsand uncertain economic conditions, as well as the absence of expected governmentsupport as a stabilising factor (compared with financial institutions).
 
SovereignOverview 
051015202530Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110(Quarter/year)Developed markets Emerging markets All(% of portfolio)
 
Sovereign Negative Outlooks
 
Source: Fitch
 
Outlook Trend
 
·
For high‐grade sovereigns, the broad outlook isnegative for credit and ratings
 ·
Emerging market sovereign credit quality willcontinue to improve
 
Key Risks
 
·
Failure to articulate credible fiscalconsolidation programmes threatens financialstability
 ·
“Confidence shocks” that undermine access tolong‐term and affordable fiscal funding
 ·
Uncertain prospects, especially for highly‐leveraged economies, compound the fiscalchallenges
 ·
Persistent global imbalances pose a risk tosustained economic recovery
 
Credit Market Research
The Credit Outlook Sovereign Debt Worries Cloud Fragile Economic RecoveryMay 2010
 
3Public FinanceOverview 
Key Risks
 
·
Weaker fiscal revenues
 ·
High capex to boost employment
 ·
Rising deficits, including current balance
 ·
Increased debt and refinancing needs
 ·
Immigration and ageing population placing pressure on current expenditure
 
FinancialInstitutionsOverview 
0102030405060Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110(Quarter/year)EMEA North America EM All(% of portfolio)
 
Financial Institutions Negative Outlooks
 
Source: Fitch
 
Outlook Trend
 
·
Global rating outlooks for financial institutionsshould achieve further stabilisation in 2010
 
Key Risks
 
·
Further asset quality deterioration, includingasset bubbles in Asia
 ·
Refinancing/market access
 ·
Profitability and liquidity
 ·
Adverse regulatory developments
 ·
Sovereign credit profile pressure
 
InsuranceOverview 
010203040506070Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110(Quarter/year)EMEA North America All(% of portfolio)
 
Insurance Negative Outlooks
 
Source: Fitch

Activity (24)

You've already reviewed this. Edit your review.
1 hundred reads
1 thousand reads
1 thousand reads
colingalloway liked this
Oscar Volti liked this
PhukingMutayshun liked this
ECLT liked this
rostinaustin liked this
g_saduk1035 liked this

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->