Fri, 26th May 2017

Anirudh Sethi Report


Archives of “sovereign ratings” Tag

Fitch slashes India growth forecast to 4.8% for FY14

Following suit of various rating agencies, Fitch Ratings cut India’sgrowth forecast for 2013-14 to 4.8% from its earlier estimate of 5.7%. The agency also slashed the projection for the next financial year to 5.8% from 6.5% projected earlier, “underlining the severity of the growth shock.”

The agency said that scope of India’s economic growth has been rendered by the falling rupee.

“The prospects for a swift turnaround in the economy have been further dented by the sharp 20% depreciation in the exchange rate since the end of May due to increased financial market concerns over India’s large current account deficit”, said Fitch Ratings in its ‘Global Economic Outlook’ report released on Thursday.

It said that the weaker exchange rate has not only dampened consumer and business confidence but also complicated matters for India’s policy makers. “Pressure on the exchange rate has hindered India’s ability to provide either fiscal or monetary stimulus to support growth”, said Fitch Ratings. Read More 

Fitch Affirms Germany at ‘AAA’; Outlook Stable (Full Text )

 Fitch Ratings has affirmed Germany’s Long-term foreign and local currency Issuer Default Ratings (IDR) at ‘AAA’ with Stable Outlook. The agency has also affirmed the Short-term foreign currency IDR at ‘F1+’ and the Country Ceiling at ‘AAA’.

The affirmation of Germany’s sovereign ratings reflects the following factors:
– The government has overachieved on some key fiscal targets. The general government structural balance was in surplus in 2012 for the first time since re-unification, well within the 0.5% of GDP deficit medium-term objective (MTO) set under the Stability and Growth Pact. The federal structural balance was also better than the 0.35% of deficit limit from 2016 set under the German constitution. This helped the government beat its target for the headline fiscal balance for a second consecutive year in 2012, with a surplus of 0.2% of GDP.

– Fitch believes the debt/GDP ratio has peaked. Germany has all the ingredients of a declining public debt path. The economy is growing, the budget position is relatively favourable and nominal interest rates are low. Furthermore, while debt at 81.9% of GDP in 2012 remains elevated compared with the ‘AAA’ median of 49%, it is within the range consistent with a ‘AAA’ rating.

– Risk from contingent liabilities from the eurozone crisis have eased. This reflects the recent strengthening of eurozone governance measures, including the implementation of the EU ‘two-pack’ regulation, which has enshrined fiscal consolidation in national economic policies. The ECB’s Outright Monetary Transactions has significantly eased some of the tail risks for the eurozone outlook. However, Fitch believes the eurozone crisis is not yet over and will require further country-level fiscal and structural adjustment, greater progress towards a banking union and a broad-based economic recovery across the currency union Read More 

Fitch Downgrades Egypt to ‘B-‘; Outlook Negative -Full Text

Fitch Ratings has downgraded Egypt’s Long-term foreign and local currency Issuer Default Ratings (IDRs) to ‘B-‘ from ‘B’. The Outlooks are Negative. The Short-term rating has been affirmed at ‘B’ and the Country Ceiling downgraded to ‘B-‘ from ‘B’.


The downgrade of Egypt’s sovereign ratings reflects the following key rating drivers and their relative weights:-

– There is a risk of a material deterioration of domestic political stability, with downside risks for economic outcomes and creditworthiness. There is high uncertainty over how the risks resulting from the military coup evolve over the short term and the eventual pathway to a peaceful political transition.

– The political environment may make it harder to implement the fiscal and structural reforms necessary to secure an IMF programme.

– Heightened uncertainty and inflamed political tensions are likely to set back the recovery and may worsen already seriously deteriorated fiscal outcomes. Read More 

Outlook On Portugal Revised To Negative On Growing Political Uncertainties; ‘BB/B’ Ratings Affirmed-S&P (Full Text )

  • In our view, this week’s ministerial resignations complicate Portugal’s already-challenging policymaking environment and suggest even less room for maneuver than when we changed the rating outlook to stable in March 2013.
  • We believe that growing political uncertainty could derail Portugal’s forthcoming debt issuance and its hoped-for exit in 2014 from the Troika-sponsored support program.
  • We are therefore revising our outlook on the long-term sovereign credit ratings on Portugal to negative from stable.
  • The outlook revision reflects our opinion that we could lower the sovereign ratings on Portugal if growing political uncertainty slows its structural fiscal adjustment process and undermines support from official lenders, including the EU and IMF.
  • We are affirming our ‘BB/B’ long- and short-term sovereign credit ratings on Portugal. Read More 

Fitch Affirms United States at ‘AAA’; Outlook Remains Negative

Fitch Ratings has affirmed the United States (U.S.) Long-term foreign and local currency Issuer Default Ratings (IDRs) and Fitch-rated Treasury security ratings at ‘AAA’. Fitch has also affirmed the U.S. Country Ceiling at ‘AAA’ and Short-term foreign currency rating at ‘F1+’. The Outlook on the Long-term IDRs remains Negative.

The affirmation reflects the U.S.’s strong economic and credit fundamentals, including the global reserve currency status of the U.S. dollar, and progress on reducing government budget deficits. The Outlook remains Negative due to continuing uncertainty over the prospect for additional deficit-reduction measures necessary to reduce government indebtedness over the medium to long term, and near-term risks associated with the expiration of federal appropriations authority at the end of the current fiscal year (30 September 2013) and in particular a timely increase in the debt limit.

Fitch will conduct a further review of the U.S. sovereign ratings by the end of 2013, which is expected to resolve the Negative Outlook. This review will reflect our assessment of the prospects for further deficit-reduction measures in future years necessary to contain government deficits in the face of long-term spending pressures and place public debt on a downward path.

The affirmation of the U.S. ‘AAA’ sovereign ratings with a Negative Outlook reflects the following key factors. Read More 

Fitch Affirms Switzerland at ‘AAA’; Outlook Stable-Full Text

Fitch Ratings has affirmed Switzerland’s Long-term foreign and local currency Issuer Default Ratings (IDRs) at ‘AAA’ with a Stable Outlook. Fitch has simultaneously affirmed the Short-term foreign currency IDR at ‘F1+’ and the Country Ceiling for Switzerland at ‘AAA’.

The affirmation of Switzerland’s ‘AAA’ sovereign ratings with Stable Outlook reflects the following key rating factors:

– The country has an advanced, diversified and wealthy economy, which is supported by a track record of low and stable inflation and macroeconomic stability despite the sluggish global recovery and eurozone crisis.

– Public finances are significantly better than the ‘AAA’ median indicators with the EU-definition of gross general government debt at 35.3% of GDP, and net debt at 24.4% of GDP at end-2012. Central government debt has fallen to 18.9% of GDP at end-2012, from 27.5% in 2003, underpinned by the Swiss federal debt brake. The general government balance has been recording consistent surpluses since 2006, and was 0.6% of GDP in 2012. Read More 

Fitch Affirms Japan at ‘A+’; Negative Outlook

Fitch Ratings has affirmed Japan’s Long-term foreign and local currency Issuer Default Ratings (IDRs) at ‘A+’ with a Negative Outlook. The Short-term IDR has been affirmed at ‘F1+’. The Country Ceiling has been affirmed at ‘AA+’.

The affirmation of Japan’s sovereign ratings in part reflects the greater commitment of the Bank of Japan and government to bring to an end two decades of economic stagnation and deflation. If successful and underpinned by structural reform to raise potential growth along with a credible medium-term deficit reduction plan, Japan’s adverse public debt dynamics could be corrected. The Negative Outlook reflects the uncertainty over the success of these efforts to shift the economy onto a more positive real and nominal growth path as well as the absence of more detailed reform and fiscal consolidation programme.


The affirmation of the ratings with Negative Outlooks reflects the following key factors: Read More 

S&P Downgrades Berkshire From AA+ To AA, Outlook Negative

Obviously with Buffett a major shareholder of Moody’s, the only place where a downgrade of Berkshire could come from was S&P. Moments ago, the rating agency that dared to downgrade the US for which it is being targeted by Eric Holder’s Department of “Justice”, did just that.

On New Criteria, Berkshire Hathaway Inc. Downgraded To ‘AA’, Core Ins. Subs Affirmed At ‘AA+’, Senior Debt Rated ‘AA’


  • Under our revised group methodology criteria, we are lowering our counterparty credit rating on BRK to ‘AA’ from ‘AA+’. At the same time, we are affirming our ‘AA+’ counterparty credit and financial strength ratings on BRK’s core operating insurance companies.
  • The ratings reflect our view of the group’s excellent business risk profile and very strong financial risk profile based on an extremely strong competitive position and very strong capital and earnings.
  • The negative outlook reflects the U.S. sovereign ratings cap and our view that the group’s capital adequacy per our capital adequacy model could deteriorate relative to its risk profile.

Rating Action

On May 16, 2013, Standard & Poor’s Ratings Services lowered its counterparty  credit rating on Berkshire Hathaway Inc. (NYSE:BRK; AA/Negative/A-1+) by one  notch to ‘AA’ from ‘AA+’ and affirmed its ‘AA+’ insurance financial strength  ratings on BRK’s core subsidiaries following release of our revised Insurers  Rating and Group Rating Methodology, released on May 7, 2013. The outlook on all ratings is negative. At the same time, we assigned our ‘AA’ senior debt rating to Berkshire Hathaway Finance Corp.’s (BHFC) $1.0 billion senior 
unsecured notes. BHFC has issued the notes in two tranches: $500 million 1.3% senior unsecured notes due May 15, 2018, and $500 million 4.3% senior unsecured notes due May 15, 2043. The company used the proceeds of this issue to repay $1.0 billion of senior notes maturing on May 15, 2013. Read More 

Fitch Upgrades Greece to ‘B-‘; Outlook Stable

 BREAKING NEWS-FLASHFitch Ratings has upgraded Greece’s Long-term foreign and local currency IDRs to ‘B-‘ from ‘CCC’. The Short-term foreign currency IDR has also been upgraded to ‘B’ from ‘C’ and the Country Ceiling upgraded to ‘B’ from ‘B-‘. The Outlook on the Long-term IDRs is Stable.

The upgrade of Greece’s sovereign ratings by one notch to ‘B-‘ reflects the following factors:

The Greek economy is rebalancing: clear progress has been made towards eliminating twin fiscal and current account deficits and ‘internal devaluation’ has at last begun to take hold. The price has been high in terms of lost output and rising unemployment and the capacity for recovery is still in doubt. Nonetheless, sovereign debt relief and an easing of fiscal targets have lifted Central Bank measures of economic sentiment to a three-year high and the risk of eurozone exit has receded.

The Economic Adjustment Programme (EAP) is on track amid a semblance of political and social stability. The current administration has displayed much greater ownership of the EU-IMF funded EAP than its predecessors, committing to further upfront fiscal consolidation and a renewed push on structural reforms. Still, tangible economic recovery remains elusive, while resistance to reform is high, underlining the continuing risks to implementation.

Greek primary fiscal adjustment of over 9% of GDP in 2009-12 (excluding one-off support to the financial sector), and around 16% in cyclically adjusted terms, ranks as the most ambitious instance of fiscal consolidation among advanced economies in recent times. The current account deficit has also shrunk from 10% of GDP in 2011 to 3% in 2012. The revised EU-IMF programme gives Greece two additional years (2015-16) to attain a primary surplus of 4.5% of GDP. This relaxation is reflected in Fitch’s expectation of a milder economic contraction of around 4.3% in 2013 (-6.4% in 2012) and a weak recovery in 2014.

Structural reforms are progressing. The financial system has stabilised: EUR16bn-EUR17bn of time deposits have returned to the system since mid-2012 and bank recapitalisation is well advanced. Meanwhile, a small, but significant milestone was passed earlier this month with the completion of the first major privatisation since the EAP began. Considerable progress has also been made with labour market reforms and 80% of the earlier loss of competitiveness has been clawed back. However, product market reform remains a major challenge: progress in this area will be important to support a sustainable recovery and for the success of the EAP.

Fitch Downgrades Bank of England to ‘AA+’; Outlook Stable

Fitch Ratings-London-24 April 2013: Fitch Ratings has downgraded the Bank of England’s (BoE) Long-term Issuer Default Rating (IDR) to ‘AA+’ from ‘AAA’ following the downgrade of the UK sovereign rating on 19 April 2012. The senior unsecured Short-term rating has been affirmed at ‘F1+’. The Outlook is Stable.

BoE’s Long-Term IDR is directly aligned with that of the UK government. The BoE is the monetary arm of the UK sovereign and as such its credit profile is aligned with that of the sovereign government.

While central banks have unlimited capacity to create base money, in practice the net present value of seigniorage, the profit from money creation, is limited and typically channelled to the government. This reinforces the close link between the central bank and the sovereign ratings. The monetary financing flexibility and the international reserve currency status of the sterling are already reflected in the UK’s sovereign ratings. Read More