Country Risk Annual Report 2021

Agencies’ Ratings have remained relative stable since the start of the COVID pandemic and through 2021. Changes have been mainly concentrated in Emerging Economies. Sovereign spreads have been clearly influenced by the strong and coordinated reaction of Central Banks in both Advanced Economies and Emerging Economies

Key points

• Key points:
• Government balances and public debt levels have improved slightly with respect to last year, but continued to be highly deteriorated, due to the extraordinary fiscal effort required by the public policy measures that have been implemented across the world in order to reduce the economic harm caused by the pandemic.
• On the private sector side, private debt disequilibria have decreased overall in 2021 thanks to the recovery of GDP levels (lower Debt-to-GDP ratios and higher equilibrium levels), but have remained elevated in several Advanced Economies and China
• Housing prices have surged across the board during 2021, specially in Advanced Economies
• The upsurge in debt disequilibria observed after the COVID crisis (that has extended during 2021) has increased the vulnerability of the banking system in several countries, mainly in Core Europe and other Advanced Economies, US and China
• Currency tensions have been overall relatively muted and we expect them to remain broadly contained, but likely to observe heterogeneity according to idiosyncratic vulnerabilities and policies.

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