Ratings of emerging economies to withstand the pressure

David Oakley

Stability of emerging markets financial crisis was underscored by the agency Standard & Poor’s. According to her acting duties in these countries practically ceased to deteriorate.
The number of sovereign debt by credit rating lowered among emerging economies has declined markedly since March. These countries avoided the collapse, from which many investors feared after the collapse of Lehman Brothers last September, says rating agency. „This asset class has shown toughness and resist the external shock – the earthquake that turned one and another cabinet, but the house collapsed,“ it said in a report from S & P.
„Newly industrialized countries remained stable since taken measures to submission of order in their economies. Deepening financial markets, the accumulated reserve, have adopted flexible exchange rate policy and reduced debt. These steps have had a strong healing effect, „said John Chambers from S & P. He added: „The future holds risks. 60% of these countries are not investment grade due to financial and fiscal instability or weak political institutions. The problems have not disappeared, but generally they have gone through a crisis quite successfully. “
Emerging markets have benefited from the return of appetite for risky assets after the stock market recovery which began in March. This helped to open up the credit markets, some governments are subjected to intense pressure because of its inability to refinance its debt – mainly countries in Central and Eastern Europe like Hungary.
Since March S & P fell just three of 14 sovereign ratings for the previous 6 months. Rise was the status of some of the riskiest countries like Pakistan, which recently was on the verge of its outstanding debts.
In the six months after the collapse of Lehman Brothers had lowered the ratings of countries such as Bulgaria, Georgia, Hungary, Latvia, Russia, Ukraine, Argentina, Ecuador, Nigeria and Pakistan. Iceland, Latvia and Ukraine have recourse to the financial support of multilateral institutions like the IMF to avoid a collapse of their markets.
Despite the freezing of credit markets and the severe downturn in the global economy, only two countries, Ecuador and the Seychelles, is overdue obligations since the beginning of the crisis in August 2007, says S & P. At present, 12 of a total of 42 emerging economies had a negative outlook at 16 early in the year. The report covers the 42 governments of countries with low and average national income, which have serious issues foreign currency bonds or a substantial base of foreign investors for government debt in local currency.

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