2017 Annual Sovereign Default Study And Rating Transitions 2017 Annual Sovereign Default ...

78 Pages·2012·4.74 MB·English

DDeeffaauulltt,, TTrraannssiittiioonn,, aanndd RReeccoovveerryy::
22001177 AAnnnnuuaall SSoovveerreeiiggnn DDeeffaauulltt SSttuuddyy AAnndd RRaattiinngg
TTrraannssiittiioonnss
MMaayy88,,22001188
In2017,thereweresixdefaultsamongthesovereignobligorsthatS&PGlobalRatingsrates.This GLOBALFIXEDINCOMERESEARCH
isthehighestnumberofsovereigndefaultsinasingleyear,thoughtherewereonlyfivedefaulting
LawrenceRWitte,CFA
sovereigns,asElSalvadordefaultedtwice.TheotherdefaulterswereBelize,Congo-Brazzaville, SanFrancisco
Mozambique,andVenezuela.AllbutElSalvadorhadalsodefaultedinpreviousyears.Lastyear's (1)415-371-5037
totalwasfourmoresovereigndefaultsthanin2016,and2017wasthesixthconsecutiveyearwith larry.witte
@spglobal.com
atleastone.
SECONDARYCONTACTS
Includingthedefaults,welowered21sovereignratingsandraised14in2017.Ratingactionsin
AbhikPDebnath
2017werelessnumerousandhadamorepositivebiasthanin2016,withsignificantlymore
Mumbai
upgradesandfewerdowngrades.Theresultingratioofdowngradestoupgradeswaslowerin2017
Abhik.Debnath
thanin2016,butdowngradesstilloutnumberedupgrades. @spglobal.com
Rating-actiontriggerswereunusuallyvariedin2017.Defaultswerethemostcommonreasonfor SundaramIyer
downgrades,butsixotherfactorswerealsocitedasthemaincause.Analystscitedsixdifferent Mumbai
sundaram.iyer
maincausesofupgradesaswell.Regionaldifferenceswereevident:Europeanissuersaccounted
@spglobal.com
formostoftheupgradesfortheyear,whileLatinAmerica,theMiddleEast,andAfricahadnearly
allofthedowngrades.
Overview
- Thereweresixsovereigndefaultsin2017,thehighestnumberforanyyear.
- Fortheseventhconsecutiveyear,sovereigndowngradesoutnumberedupgrades.
- Theratioofdowngradestoupgradesdeclinedto1.5in2017from2.7in2016.Inaddition,
theaveragenumberofnotchesfordowngradesdecreasedto1.18in2017from1.50in
2016,andtheaverageupgradewas1.15notchesin2017comparedwith1.00in2016.
- Ofthe132activesovereignratingsattheendof2017,53%wereinvestmentgrade,the
second-lowestpercentageonrecord.
- Thepercentageofratingswithpositiveoutlooksincreasedinseveralregions,suggesting
thatthefrequencyofdowngradescoulddecreaseinthenextyearortwo.
- Ginicoefficients,whichshowthecumulativeproportionofdefaultstothecumulative
proportionofthesovereignrateduniverse,suggestastrongrelationshipbetween
ratingsanddefaults.TheGinicoefficientsfortheone-,three-,five-,and10-year
horizonsare92%,79%,74%,and73%,respectively.
www.spglobal.com/ratingsdirect May 8, 2018 1
Default, Transition, and Recovery: 2017 Annual Sovereign Default Study And Rating Transitions
Sovereignratingscouldbeenteringaperiodofgrowingstability.Inearly2018,thereweremore
sovereignratingswithpositiveoutlooksthannegativeoutlooksforthefirsttimesincethestartof
2008.However,thisdoesnotsuggestthatsovereignratingsreflectimprovingcreditstrength.
Duringthelast10years,theaveragesovereigncreditratinghasdeclined.Toillustrate:The
percentageofhigh-investment-grade('AA'categoryand'AAA')ratingsisthelowestonrecordat
22%.Inaddition,investment-graderatingsmakeupjust53%ofthetotal,thesecond-lowest
percentage(lastyearwasthelowest).Correspondingly,47%ofratingsarespeculative-grade,just
slightlybelowthepeakof48%in2017.Thepercentageofratingsinthe'B'categoryandlowerhas
beenatitshighof31%since2016.Theoutlookssuggestthatthedistributionofratingsinthe
lowercategorieswillcontinueoveratleastthenext18months,withsomepotentialfor
improvement.
RatingsDistribution
S&PGlobalRatingsmaintained132sovereignratingsasofJan.1,2018.Thiswasonefewerthan
oneyearearlier.Thenetdecreaseofonestemmedfromtwowithdrawals(GabonandKyrgyz
Republic)andonenewrating(Nicaragua).Attheendof2017,21ofthe133ratingsatthestartof
theyearwerelower,14werehigher,and97wereunchanged.
Sovereignratingdistributionhasbeentrendinglowersincethelate1980s,whencountrieswith
smallerandless-diversifiedeconomiesbegantoseekcreditratings.Thepercentageof
speculative-graderatingsincreasedsignificantlyto37%in1999from3%in1990.Thiswasmostly
aresultofnewspeculative-graderatingsbeingassignedasopposedtodowngradesofformerly
investment-gradesovereigns.Overthisperiod,thenumberofspeculative-graderatingsroseto30
fromone,whilethenumberofinvestment-graderatingsincreasedto52from30.Thenumberof
sovereignsthatweratehasgrownasmoregovernmentsaccesstheinternationalbondmarkets.
We'verated(foreign-currencyratings)141sovereignssince1975.
During2000-2009,growthinspeculative-graderatingscontinuedtooutpaceinvestment-grade
ratings,butthelattergroupgrewaswell.Speculative-graderatingsincreasedto53in2009from
33in2000,whileinvestment-graderatingsgrewto70from54overthesameperiod.In2009,43%
ofratingswerespeculativegrade.During2010-2017,thenumberandpercentageof
speculative-graderatingsincreasedto60and47%,respectively,whilethesamefiguresfor
investment-graderatingsdeclinedto69and53%.In2017,twolow-investment-gradesovereigns
weredowngradedtospeculativegrade,whilethreespeculative-gradesovereignswereupgraded
tothelowestinvestment-graderating:'BBB-'.
www.spglobal.com/ratingsdirect May 8, 2018 2
Default, Transition, and Recovery: 2017 Annual Sovereign Default Study And Rating Transitions
Chart1
By2011,thesizeoftheratedsovereignuniversestabilizedatabout130.Fiveyearsearlier,there
were112sovereignratings.Anothersuchincreaseisunlikelygiventherelativelysmallandstatic
numberofnationsintheworld.Forthatreason,theprofileofsovereignratingswillchangealmost
exclusivelywiththemovementofexistingratings.
Asofyear-end2017,16local-currencysovereignratingswerehigherthanthecorresponding
foreign-currencycreditratings.ThisreflectsS&PGlobalRatings'viewthatasovereignhas
flexibilityinservicingitslocal-currencydebtbasedontheuniquepowersitenjoyswithinitsown
borders,particularlyinitscontrolofdomesticfinancialandmonetarysystems.Thisstudyfocuses
onforeign-currencyratingsunlessotherwisenoted.
Table1
SovereignsWithLocal-CurrencyRatingsThatWereHigherThanThe
Foreign-CurrencyRatingsAsOfDec.31,2017
Country Foreign-currencyrating Local-currencyrating
Barbados CCC+/Negative/C CCC/Negative/C
Chile A+/Stable/A-1 AA-/Stable/A-1+
Colombia BBB-/Stable/A-3 BBB/Stable/A-2
Congo(Republicof) CCC+/Stable/C B-/Stable/B
CzechRepublic AA-/Stable/A-1+ AA/Stable/A-1+
Guatemala BB-/Stable/B BB/Stable/B
Malaysia A-/Stable/A-2 A/Stable/A-1
Mexico BBB+/Stable/A-2 A-/Stable/A-2
Mozambique SD/--/SD B-/Stable/B
NewZealand AA/Stable/A-1+ AA+/Stable/A-1+
www.spglobal.com/ratingsdirect May 8, 2018 3
Default, Transition, and Recovery: 2017 Annual Sovereign Default Study And Rating Transitions
Table1
SovereignsWithLocal-CurrencyRatingsThatWereHigherThanThe
Foreign-CurrencyRatingsAsOfDec.31,2017 (cont.)
Country Foreign-currencyrating Local-currencyrating
Peru BBB+/Stable/A-2 A-/Stable/A-2
Poland BBB+/Stable/A-2 A-/Stable/A-2
Russia BB+/Positive/B BBB-/Positive/A-3
SouthAfrica BB/Stable/B BB+/Stable/B
Thailand BBB+/Stable/A-2 A-/Stable/A-2
Venezuela SD/--/D CCC-/WatchNeg/C
Source:S&PGlobalFixedIncomeResearch.
Chart2
RegionalRatingDistribution
S&PGlobalRatingssegmentsmostofthesovereignsitratesintosixregionalcategories:Middle
EastandNorthAfrica,Sub-SaharanAfrica,LatinAmericaandtheCaribbean,Asia-Pacific,
eurozone,andCentralandEasternEuropeandCIS(theCommonwealthofIndependent
States--theformerSovietrepublics).Wefurtherdesignate20nations,whichcomefromallofthe
categoriesexcepttheeurozone,asemergingmarkets.Twenty-fivesovereigns--includingtheU.S.,
theU.K.,andCanada--arenotdesignatedinanyofthesecategories.
www.spglobal.com/ratingsdirect May 8, 2018 4
Default, Transition, and Recovery: 2017 Annual Sovereign Default Study And Rating Transitions
Table2
SovereignsByRegionalCategory
MiddleEastand CentralandEastern Emerging
Africa LatinAmerica EuropeandCIS* Asia-Pacific eurozone markets
AbuDhabi Argentina Albania Australia Austria Argentina
Bahrain Aruba Azerbaijan Bangladesh Belgium Brazil
Egypt Bahamas Belarus China Cyprus China
Iraq Barbados BosniaandHerzegovina CookIslands Estonia¶ Colombia
Jordan Belize Bulgaria Fiji Finland Egypt
Kuwait Bermuda Croatia HongKong France Hungary
Lebanon Bolivia CzechRepublic India Germany India
Morocco Brazil Estonia¶ Indonesia Greece Indonesia
Oman Chile Georgia Japan Ireland Malaysia
Qatar Colombia Hungary Korea Italy Mexico
RasAlKhaimah CostaRica Kazakhstan Malaysia Latvia¶ Pakistan
SaudiArabia Curacao Latvia¶ Mongolia Lithuania¶ Philippines
Sharjah Dominican Lithuania¶ NewZealand Luxembourg Poland
Republic
Angola Ecuador Macedonia Pakistan Malta Qatar
Botswana ElSalvador Montenegro PapuaNew Netherlands Russia
Guinea
BurkinaFaso Guatemala Poland Philippines Portugal SaudiArabia
Cameroon Honduras Romania Singapore Slovak SouthAfrica
Republic
CapeVerde Jamaica Russia SriLanka Slovenia¶ Thailand
Congo Mexico Serbia Taiwan Spain Turkey
Congo,D.R. Montserrat Slovakia Thailand Venezuela
Ethiopia Nicaragua Slovenia¶ Vietnam
Ghana Panama Tajikistan
Kenya Paraguay Turkey
Mozambique Peru Ukraine
Nigeria Suriname
Rwanda Trinidadand
Tobago
Senegal TurksandCaicos
SouthAfrica Uruguay
Uganda Venezuela
Zambia
*CommonwealthofIndependentStates,theallianceof12oftheformerrepublicsoftheSovietUnion.¶IncludedintwoEuropeanregions.
Source:S&PGlobalFixedIncomeResearch.
TheMiddleEast,Africa,andLatinAmericahaveaddedthemostspeculative-graderatingsover
www.spglobal.com/ratingsdirect May 8, 2018 5
Default, Transition, and Recovery: 2017 Annual Sovereign Default Study And Rating Transitions
thelastdecade.Whiletherearemorespeculative-graderatingsinAsia-PacificandEurope,the
increasesinthoseregionshaven'tsignificantlyaffectedtheoverallqualityofsovereignratings.
Mostnewsovereignratingssince1998havealsocomefromtheMiddleEast,Africa,andLatin
America.ThenumberofsovereignratingsinCentralandEasternEuropeandCIShasalso
increasedsubstantiallyonapercentagebasis,thoughtherearen'tasmanyofthem.Asia-Pacific
hasaddedfewerratingsstill,andtheeurozonehasretaineditstallyof19ratingssince1998.The
overalleffecthasbeenareductioninthegeneralcreditqualityofsovereignratings.
MiddleEastandAfrica
Chart3
TheMiddleEastandAfricahadonesovereignrating--'BB'--in1995.Thetallyincreasedtoseven
ratingsin1998,fourofwhichwereinvestmentgrade.Thenumberofratingshasincreased
steadilysincethen,andtheportionthatarespeculative-gradehasstayedfairlyconsistent.Atthe
endof2017,therewere30ratingsintheregion,two-thirdsofwhichwerespeculativegrade.
LatinAmerica
www.spglobal.com/ratingsdirect May 8, 2018 6
Default, Transition, and Recovery: 2017 Annual Sovereign Default Study And Rating Transitions
Chart4
LatinAmericahadonerating--'AAA'--in1982,andtherewasonlyonespeculative-graderatingin
eitherthe'BB'or'B'categoriesfrom1983through1992.ThenumberofLatinAmericansovereign
ratingsincreasedsteadilyfrom1993through2001,withmorethanthree-quartersspeculative
grade.LatinAmericansovereignratingshavetendedtobefairlylow.They'veimprovedsince2003,
butevenattheirbest,theywerejustbelow50%speculativegradein2015.Attheendof2017,
59%(17)ofLatinAmericaforeign-currencysovereignratingswerespeculativegrade,tiedwith
2006-2008forthehighestregionaltally.
Asia-Pacific
www.spglobal.com/ratingsdirect May 8, 2018 7
Default, Transition, and Recovery: 2017 Annual Sovereign Default Study And Rating Transitions
Chart5
We'verated18ofour21Asia-Pacificsovereignssince1988,andmostoftheseratingsare
investmentgrade.Theregiononlyhadinvestment-graderatingsuntil1992.Speculative-grade
ratingsbecamemoreprevalentandhaveaveraged44%ofallratingssince1999.Therehavealso
beensevenratingsinthe'AA'categoryor'AAA'intheregionsince2011.Attheendof2017,there
were21ratedAsia-Pacificsovereigns,43%ofwhichwerespeculativegrade.
CentralandEasternEuropeandCIS
www.spglobal.com/ratingsdirect May 8, 2018 8
Default, Transition, and Recovery: 2017 Annual Sovereign Default Study And Rating Transitions
Chart6
S&PGlobalRatingsassigneditsfirstsovereignratingsinCentralandEasternEuropeandtheCIS
in1993.Atleastathirdofthesovereignratingsinthisregionhavealwaysbeenspeculative-grade.
Thehighestpercentageofspeculative-graderatingswas67%in1995,andthepercentagehas
beenatleast50%since2010.Attheendof2017,59%ofratingsintheregionwerespeculative
grade,with'BB'categoryratingsthemostcommon.Therewerealsotwo'AA'categoryratings.
eurozone
www.spglobal.com/ratingsdirect May 8, 2018 9
Default, Transition, and Recovery: 2017 Annual Sovereign Default Study And Rating Transitions
Chart7
Amongourregionalcategories,theeurozonecontainsthefewestratings,andthenumberhasnot
changedsince1998.eurozoneratingsarealsothehighest,withanaverageofjust6%ofratings
thatarespeculativegradesince1995.Inaddition,moreeurozonesovereignratingsareinthe'AA'
categoryor'AAA'thaninotherregions,despitethesmallernumberofratings.Ofratingsinthe
region,16%havebeenspeculativegradeeveryyearsince2013.Thisistheregion'shighest
percentageofspeculative-graderatings,reflectingtheafter-effectsofthefinancialcrisis.By
contrast,in2009therewerenospeculative-graderatingsintheregion.
EmergingMarkets
www.spglobal.com/ratingsdirect May 8, 2018 10