Ratings agency S&P lowered its outlook on China’s credit rating of ‘AA-‘ to negative from stable, citing the Mainland’s attempts to overhaul its economy from an investment-led and export-oriented one toward domestic-led growth was proceeding at a slower pace than expected.
The move follows that by Moody’s, which lowered its outlook on China to negative earlier in March 2016 for its credit rating of Aa3. Fitch Ratings rated China as ‘A+’ with a stable outlook.
As part of its rationale on the lower outlook on China, S&P outlined the following reasons:
- gradual increase in economic & financial risk to the government’s creditworthiness
- weakening of sovereign and corporate credit metrics
- increased reliance on credit to push the sluggish economy
According to HSBC Holdings plc, nations of the Gulf Cooperation Council (GCC) may face some difficulty in refinancing $94bn worth of debt by 2018, after being impacted by falling crude oil prices, slowing growth, rising rates and rating downgrades.
GCC countries, dominated by United Arab Emirates and Qatar, face $52bn of bonds and $42bn of syndicated loans maturing in the next two years. These countries also have a cumulative fiscal and current account deficit of $395bn over the period. Further, Gulf nations have a total of $610bn of FX-denominated debt and syndicated loans outstanding currently.
HSBC is confident that these nations would be able to tackle the issues of maturing debt and fiscal deficits through a raft of issuances of sovereign debt in the near-term.
Citigroup’s economists on Wednesday lowered their forecast on 2016 global economic growth to 2.5% from 2.7% percent due to a slowdown in activity in developed economies in addition to weakening emerging markets.
Reasons cited by the economists were a probable “mismeasurement” of China’s economic growth data and a more than expected deterioration among emerging economies, factors which could drag down global growth to below 2%.