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Global Sovereign Sector Outlook Is Neutral, with Fiscal Risks in Focus, says Fitch Ratings

Global sovereign credit conditions are neutral entering 2024, as moderately weaker global economic growth and persistent strains on fiscal positions are balanced by improvements in inflation dynamics and forecast reductions in most central bank policy rates, Fitch Ratings says in its Global Sovereigns Outlook for 2024. Risks to the outlook centre on additional pressures on public finances, particularly on the spending side.

The role of fiscal policy has been expanding for more than a decade, and this will continue in 2024, in Fitch’s view. Delivering inclusive economic growth, addressing climate and energy transition challenges, and engaging more actively in industrial policy in response to the coalescence of trade policy and national security concerns add to governments’ counter-cyclical roles, especially in developed-market economies.

For both emerging- and developed-market sovereigns, higher costs of funding will persist, with interest payments typically absorbing a rising share of revenues. It will be another difficult year for lower-rated emerging markets trying to access international capital markets, meaning they could be required to adjust funding needs lower or seek alternative sources of funding. With 18% of sovereigns rated ‘CCC+’ or lower, additional defaults are possible in 2024.

The “Global Sovereign Outlook 2024” is available via the link about or on the Outlooks page at www.fitchratings.com.

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