Country Risk Annual Report 2022

Agency’s ratings have remained stable or changes have been positive in Advanced Economies (AE), despite the negative impact of the war in Ukraine and the monetary policy tightening. On the contrary, rating changes have been mostly negative for Emerging Economies (EE), although mainly due to idiosyncratic factors.

Key points

• Key points:
• Macroeconomic vulnerabilities have worsened across the board after the upsurge in inflation and the consecutive shocks to economic activity (Ukraine war, energy crisis, China’s deceleration, etc.)
• Government balances have improved substantially with respect to last year (in part thanks to higher inflation), but public leverage continues to be deteriorated and still constitutes one of the main risks across both AE and EE.
• On the private sector side, debt gaps levels (outstanding debt vs. estimated equilibrium) have decreased overall in 2022 thanks again to higher inflation and higher nominal GDP levels, but still remain elevated in several AE and China.
• Housing prices grew strongly during the first two quarters of 2022, especially in AE, but they have started to cool down after the fast rise in interest rates across the board. The highest disequilibrium levels continue to be seen in northern Europe and the anglosphere (e.g. Canada, Australia, New Zealand)
• Currency tensions have surged mainly due to the tightening of the FED. In contrast to previous episodes, tensions have been somewhat stronger this year in AE rather than in EE and we expect this to continue in the coming months.

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