Global Recession Weighed on Sovereign Ratings in 2009

Credit quality eroded for sovereign issuers in 2009, as the global recession's impact on advanced and emerging economies continued to deepen. The share of sovereign issuers downgraded remained steady year-over-year at roughly 14%, while upgrades tumbled to just 2% in 2009 from nearly 10% a year earlier.

Emerging markets registered the most negative, as well as positive, movements on the year, recording 11 downgrades, while simultaneously accounting for the two sovereign upgrades in 2009. Developed market sovereigns observed a total of three downgrades with no upgrades on the year.

'Despite the unprecedented global recession, there were no Fitch-rated sovereign issuer defaults in 2009,' said Charlotte Needham, Senior Director in Fitch Ratings' Credit Market Research Group.

'Fitch Ratings believes diverging sovereign credit trends between advanced and emerging markets will remain a predominant theme in 2010 as public debt/GDP ratios climb steeply toward 100% in the former, even as comparable debt ratios settle at less than half this level in emerging markets,' said Paul Rawkins, Senior Director in Fitch Ratings' Sovereign Group London.

Fitch Ratings' current assessment is that 2010 will be characterized by a gradual rebalancing between positive and negative rating actions and notes that already this year the gap between Stable and Negative Outlooks has already begun to narrow.

The new study provides data and analysis on the performance of Fitch's sovereign ratings in 2009 and over the long term, capturing the period 1995-2009. The report provides summary statistics on the year's key sovereign rating trends. 

The study is titled 'Fitch Ratings Sovereign 2009 Transition and Default Study' and is available on Fitch Ratings' web site under Credit Market Research.