EM sovereign ratings show positive trend in 2025

July 18, 2025 (MLN): Emerging market (EM) sovereign rating actions have been net positive in 2025 so far, with eight upgrades compared to four downgrades, Fitch Ratings stated in a new report, despite persistent risks to the macro-credit environment.

According to Fitch, EM sovereign rating outlooks are nearly balanced, with nine countries on Positive Outlook and six on Negative.

Downgrades since 2020 have created space in some ratings to endure worsening credit conditions, while supportive policy responses may bolster ratings in certain cases.

However, Fitch has revised its 2025 sector outlook to ‘deteriorating’ from ‘neutral’ for EM regions in Asia-Pacific, eastern Europe, and sub-Saharan Africa.

The outlook for Greater China remains at ‘deteriorating’, while Latin America and the Middle East and North Africa retain a ‘neutral’ outlook.

The deterioration in the macro-credit environment for some regions in 2025 is attributed to a rise in trade tariffs and heightened policy uncertainty.

These developments are expected to weaken global growth prospects and increase the likelihood of more challenging financing conditions.

Fitch also highlighted that public finances continue to face pressure and political risks remain elevated across several emerging markets.

The report further includes responses to topical investor questions concerning China, Vietnam, Mongolia, Colombia, Ecuador, Costa Rica, Poland, Bulgaria, central and eastern Europe, Oman, Gulf Cooperation Council countries, Nigeria, Zambia, and Ethiopia.

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