Relapse in Sovereign Downgrades Reflect Global Growth in Low Gear, IHS Says

Downgrades more than double upgrades; Some good news as Southeastern European ratings edge upwards despite refugee challenges and Greece’s problems

IHS Inc. (NYSE: IHS), the leading global source of critical information and insight, today announced findings from its first quarter sovereign risk review.

“The first quarter of 2016 marked a clear relapse in the balance of global rating downgrades and upgrades, with downgrades three times the number of upgrades,” said Jan Randolph, director of sovereign risk at IHS Global Insight. “Overall, 49 countries received downgrades to 16 upgrades.” Energy exporting countries such as Angola, Azerbaijan, Bahrain, Congo, Gabon, Kazakhstan, Nigeria, Saudi Arabia and Oman were downgraded in the first quarter.

The quarterly IHS Sovereign Risk Review compares and assesses every sovereign nation worldwide across ratings agencies and fills in the industry’s long-neglected market space of short-term sovereign credit risk.

Brazil, Saudi Arabia, and Azerbaijan highlight downgrades in Q1

“Brazil isn’t likely to see the light at the end of the economic tunnel until 2017 at the earliest,” Randolph said. “Prolonged recession, painful fiscal and monetary adjustments and deteriorating debt ratios, all compounded by a scandal-related fractious Presidential impeachment process, have all served to undermine Brazil's investment grade status.”

Azerbaijan and Nigeria: Contrasting policy responses to "low oil for longer"

“Both Azerbaijan and Nigeria have been hard hit by the oil price decline shock, but the two countries could not have responded more differently,” Randolph said. “Azerbaijan has taken a good fiscal approach, is reassessing spending, and is really trying to restore its position. Nigeria has gone on the defensive. It has yet to remove all oil-related subsidies and has heavily intervened in the currency market to defend the naira, wasting foreign exchange reserves in the process.”

Until Nigeria adopts a policy approach more like Azerbaijan's and, more recently, like Angola's, the International Monetary Fund (IMF) is unlikely to engage with the country should its support become needed, according to the latest IHS report.

Bright spot: Southeastern European ratings edge upwards

Several countries in Southeastern Europe have seen rating upgrades, including Albania, Serbia, Bosnia-Herzegovina and Romania. These upgrades have come despite the proximity of ongoing travails in Greece and the heightened refugee challenges.

Both Albania and Serbia, in particular, have new governments with re-energised reform zeal, clearly marking out a policy reform pathway towards closer engagement with the European Union (EU) and, eventually, hoped-for membership of the bloc. In the first quarter, IHS upgraded both the medium-term and the short-term ratings for Albania by one notch. The changes were driven by strong foreign direct investment inflows in 2015 (especially the Trans-Adriatic pipeline and hydro-electric power projects), the repayment of government arrears, and continued success in meeting IMF targets since 2014.

Serbia, too, has been reforming its economy and administration to comply with the EU's long list of membership requirements. With an IMF stand-by programme in place, the policy anchors have served to help to narrow external and internal deficits, restrain debt build-up and offer decent GDP growth.

Ireland and Iceland: Remarkable turn arounds

“Ireland's remarkable turnaround since exiting the bailout in December 2013 has seen further rating upgrades lift it higher up the investment grades as strong underlying GDP (gross domestic product) growth and a tight fiscal position have meant the public debt metrics have fallen significantly,” Randolph said.

In Iceland, capital controls are now being lifted as economic recovery has progressed and financial stability is returning to Iceland's much-downsized banking sector and debt and currency markets. “The positive outlook on the IHS upgraded Icelandic rating suggests that our next rating action is likely to be upwards,” Randolph said. “Further progress on capital control liberalization, and a continuation of the economic recovery and improvement in the public finances, are likely to result in a new upgrade over the coming quarters.”

About IHS (www.ihs.com)

IHS (NYSE: IHS) is the leading source of insight, analytics and expertise in critical areas that shape today’s business landscape. Businesses and governments in more than 140 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs nearly 9,000 people in 33 countries around the world.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160510005739/en/

IHS Inc.Amanda Russo, +44 208 276 4727Amanda.Russo@ihs.comorKatherine Smith, +1 781-301-9311Katherine.Smith@ihs.comorPress Team, +1 303-305-8021press@ihs.com

IHS (NYSE:IHS)
Historical Stock Chart
From Mar 2024 to Apr 2024