Watchers of ratings agencies might be wondering if a golden period of steady credit upgrades for emerging economies is coming to an end. This week brought a ratings downgrade for Egypt and an outlook cut for Turkey. Hungary is teetering on the brink of having its rating cut to junk. Across the emerging world, countries are struggling with weaker growth, still-high inflation and falling investment. Debt ratios are rising. All this could bode ill for sovereign credit ratings.
But no fear. The so-called ratings convergence between developed and developing economies has some way to go yet. Egypt and Turkey may have received bad news this week but there were ratings upgrades for Kazakhstan and Georgia. Emerging countries are still more likely to be upgraded than downgraded. Debt-ridden rich nations on the other hand face ratings cuts, including possibly the mighty United States. JPMorgan points out that, emerging markets have enjoyed 35 upgrades this year, while developed sovereigns have suffered 32 downgrades and no upgrades. The bank predicts an additional 22 upgrades for the developing world in 2012.
“The convergence trend appears likely to continue, since a total of nine developed market countries remain on negative outlook or review for a possible downgrade,” according to JPMorgan. Emerging economies have received 133 sovereign upgrades since 2008, the bank notes. The last developed country upgrade that still stands? Sweden’s move up to AAA — achieved in 2004.
But Moody’s move had one big impact on Greece — it has turned it once more into an emerging market. With two of the three major ratings agencies treating Greece as sub-investment grade — 