Global sovereign sector enters 2024 with a neutral outlook, Fitch Ratings Reports

New Delhi [India], December 2 : Fitch Ratings reveals that the global sovereign credit conditions maintain a neutral stance as 2024 is near. The outlook is shaped by a delicate balance, with moderately weaker global economic growth and ongoing fiscal challenges counteracted by positive shifts in inflation dynamics and anticipated reductions in central bank policy rates across various regions.
Fiscal risks, especially on the spending side, take centre stage as a potential disruptor to this equilibrium. Fitch emphasizes that fiscal policy's role has been expanding steadily for over a decade, a trend set to continue in 2024.
Governments worldwide are expected to play a more substantial role in fostering inclusive economic growth, addressing climate and energy transition challenges, and actively participating in industrial policy--a response to the merging concerns of trade policy and national security, particularly in developed-market economies.
Both emerging and developed-market sovereigns will grapple with persistent higher funding costs, leading to interest payments consuming a growing share of revenues.
Lower-rated emerging markets, in particular, face challenges accessing international capital markets, potentially requiring adjustments to funding needs or alternative sources.
With approximately 18 per cent of sovereigns rated 'CCC+' or lower, the prospect of additional defaults looms on the horizon for 2024.
Fitch suggests these countries may face a challenging year ahead in securing financial stability.