LONDON (Reuters) - Emerging markets are likely to see more sovereign downgrades than upgrades for the next year or two, ratings firm Standard and Poor’s warned on Monday.
A new report from the firm’s chief rating officer for sovereign ratings said a record nine of the top 20 developing economies had negative outlooks on their ratings which meant they were effectively on a downgrade warning.
“This is our heaviest ever negative bias on emerging market sovereigns and why we expect downgrades will outpace upgrades in the next year or two.” S&P’s Moritz Kraemer said.
Near-term risks not only included a likely gradual rise in U.S. interest rates which could lure investors back to developed markets, slower growth in China and dipping world trade, but also more populist politics and a potential for geopolitical conflicts.
“This is why our view of emerging markets’ underlying credit quality is less positive than the market view,” Kraemer said.
Reporting by Marc Jones; editing by Sujata Rao