S&P warns of more sovereign downgrades than upgrades in 2016

On the heels of both the World Bank and IMF lowering their global growth forecasts, rating agency Standard & Poor's (S&P) today warned of more sovereign downgrades than upgrades globally in 2016. Of the 131 sovereigns S&P rates globally, 25 had negative outlook as against eight positive as of December 2015, a ratio of 3 to 1. For the past three years, the international rating outfit has been maintaining a BBB- rating on India with a stable outlook.

According to S&P Chief Sovereign Ratings Officer Moritz Kraemer, the outlook balance -- positive minus negative outlooks -- has dropped to (-)17 from the seven-year high of (-)4 in June 2015. This constitutes the most negative six-monthly swing in the outlook balance since December 2008, he said. "The negative rating actions are likely to continue to outnumber positive actions over the coming 12 months.

"The dominance of downgrades is likely to accelerate this year compared to last," he said in a report, adding that the negative outlooks have outnumbered positives since early 2008. The second half of 2015, however, saw a reversal of the gradually improving trend in the outlook balance that had begun in 2013, he said. Over the past year, the outlook balance has deteriorated in all global regions except Asia-Pacific, which continues to have a rare positive balance of (+)1.

The deterioration was most pronounced in West Asia, the Commonwealth of Independent States (CIS) and Africa, where the negative balance doubled to (-)12, an all-time regional low. Latin America and the Caribbeans (to -4 from -2) saw more moderate deterioration during 2015, as had Europe (to -2 from 0), the agency said.