Emerging Markets Credit Risk Highlights

A selection of Moody’s latest comparative insights on global emerging market research. For a complete list of EM reports on Moodys.com click here.


Sovereigns – Asia Pacific – Currency depreciation highlights a range of risks across the rating spectrum

15 September 2022

Recent currency depreciation has been much less pronounced than the declines seen during the taper tantrum in 2013, and the sell-off after the start of the coronavirus pandemic in late 2019. However, if persistent, currency depreciation would present a range of credit pressures


Government Policy – China – Rising state role in PE market boosts some sectors but brings about credit risk

15 September 2022

Rising state involvement in private equity market aids the development of public and strategic sectors in China. However, it brings about credit risks to both state and private participants.


Emerging Markets – Global – Economic outlook dampens as financial conditions deteriorate

15 September 2022

We anticipate that emerging markets' growth will buck the global trend and accelerate to 3.8% in 2023, from 3.3% in 2022. However, this will be driven almost entirely by China – most other EMs will still see a reduction in growth. 


Emerging Markets – Asia 2022 Summit – MDBs, policymakers can arrest decline in funding diversity for EM Asia infrastructure

13 September 2022

Tighter credit conditions will result in both lower financing activity and lower diversity in the financing of Asian emerging market infrastructure in the next 12-18 months, which will have an outsized impact on emerging markets (EM), especially outside of China.


Cross-sector - Islamic Finance: Sukuk issuance to remain under pressure

12 September 2022

We expect global sukuk issuance to slide further in 2022 after a large decline in 2021, which followed several years of consecutive growth.


Macroeconomics - Emerging Markets: Domestic economic and political factors will influence EM exchange rate stability as global financial conditions tighten

8 September 2022

In this year's uncertain environment, the likelihood of sporadic risk-off episodes pushing capital flows from EMs to safe havens is high.

Government of Sri Lanka - IMF staff-level agreement reopens door to external financing, a credit positive

2 September 2022

The deal will aid government efforts to turn around the economy, which lacks the foreign exchange resources to import essential items such as fuel, fertilisers and food, or to address social challenges.

Government of Mongolia - ADB funding will support targeted fiscal spending, alleviate external liquidity strains

2 September 2022

The disbursements will help offset the government's outlays for its post-pandemic countercyclical development expenditure program (CDEP) that aids vulnerable sectors of the society, support longer-term economic reforms and ease pressure on its balance of payments position. 

Government of Pakistan - IMF approves $1.1 billion disbursement and loan programme enhancement, a credit positive, but risks remain

31 August 2022

The IMF financing and the additional support from bilateral partners that it will catalyse will ease pressure on Pakistan's dwindling foreign exchange reserves, which currently cover less than two months of imports.

Sovereigns - Global: Some lower-income economies have strengthened their credit quality through a range of policies

30 August 2022

Some sovereigns have overcome constraints related to low incomes through institutional, social and economic reforms which have bolstered their credit strength.


Emerging & Frontier Markets – Global: Most EMs will avert a debt crisis but frontier markets are exposed to turning credit cycle

26 August 2022

While higher-rated EMs are resilient, some lower-rated frontier markets are facing rising liquidity risks due to challenging market conditions, raising debt sustainability risks.

Government of El Salvador: Debt buyback operation likely to be considered a distressed exchange

12 August 2022

The president's announced intention to buy back two bonds maturing in 2023 and 2025 at market prices, below par, would likely constitute a distressed exchange.

Sovereign – Gulf Cooperation Council – Hydrocarbon windfall more than offsets credit-negative effects of rising global inflation

27 July 2022

Currency pegs and fuel price caps will keep GCC inflation below levels reported elsewhere, while robust oil revenues will allow governments to sustain fuel subsidies and contain social risks

Government Policy – Asia-Pacific – Policy response to food shocks will have lasting effects on sovereigns, companies

19 July 2022

Food security has become a major concern for governments in Asia-Pacific as the Russia Ukraine military conflict continues to disrupt the supply and raise the cost of agricultural products.

Government of Panama - Rising social pressure complicates fiscal consolidation plans

19 July 2022

Given current fiscal dynamics, it looks increasingly difficult for the government to meet its fiscal targets this year.

Government of Belarus - Rouble payment of foreign-currency debt constitutes a default

14 July 2022

Forced currency re-denomination is not permitted under the bond’s indenture and results in a diminished financial obligation.

Sovereigns – Africa: Rollover risk increases amid tighter financial conditions and upcoming maturity wall

28 June 2022

An upcoming maturity wall and a deterioration in global financial conditions triggered by the Russia-Ukraine conflict will intensify rollover risks for many African sovereigns over the next decade.

Banks – G-20 emerging markets: Rapid inflation-driven rate hikes will be double-edged sword for banks

27 June 2022

Policy rate hikes to curb inflation typically lead to improvements in banks' margins. Yet a more rapid acceleration of inflation would negatively impact asset quality, erasing margin gains.

Government of Ukraine: FAQ on economy, liquidity risks and debt sustainability

7 June 2022

The Russian invasion has severely disrupted the economy and public finances. International support is forthcoming but debt will likely prove unsustainable, raising risks of a restructuring.

Government Policy – Hungary: Windfall taxes will reduce the deficit, but intensify uncertainty for foreign investors and weaken bank profits

1 June 2022

While the new measures will accelerate deficit reduction, the additional tax burden will intensify policy uncertainty for investors and businesses and further weaken bank profitability, a credit negative.

Emerging Markets – Global: Russia-Ukraine conflict heightens risks for nearly 30% of nonfinancial companies

19 May 2022

In our downside scenario about 30% of the emerging market companies we rate are at risk of credit quality erosion through commodity price shocks and financial and economic disruption.

Emerging markets: Cryptocurrency adoption is highest among lower rated sovereigns, increasing their macro risks

18 May 2022

We expect the greatest risks for sovereigns with weaker macroeconomic frameworks, particularly where cryptocurrencies can be used to evade capital controls, weakening policy effectiveness.

Banking – Emerging markets: New risks from Ukraine conflict create diverging paths for emerging market banks

17 May 2022

Some emerging market banks are better placed to deal with the latest crisis than others.

Emerging Markets - Global: Russia-Ukraine shock amplifies pandemic led credit deterioration for many sovereigns

21 April 2022

While the credit impact of the pandemic on emerging market sovereign credit was uniformly negative, this shock will result in a range of outcomes which hinder, but do not derail, the trajectory of the recovery from the pandemic


Russia-Ukraine crisis dents but does not derail global economic recovery; impact on emerging markets most acute

12 May 2022

In this report, we summarize key risks for the sovereign credit profiles of some emerging markets (EM) based on meetings with investors in Washington DC on the sidelines of the IMF-World Bank spring meetings.


Government of South Africa: FAQ on the fiscal and growth outlook, and resilience to shocks

4 May 2022

South Africa's government has faced major challenges over the past couple of years to balance support for its economy, especially during the coronavirus pandemic, with fiscal sustainability.


IMF Spring Meetings: Social and political risks tighten brake on globalization as crisis fighting fatigue sets in

28 April 2022

In April, a delegation of Moody’s analysts attended the IMF Spring Meetings in Washington DC and met with sovereign issuers from across the globe, as well as public and private-sector market participants. In this report are some of the key takeaways from those meetings.

Adequate capital and liquidity will preserve most African MDBs' credit quality amid challenging operating conditions

27 April 2022

Healthy capital positions and access to liquidity mitigate the deterioration in asset quality and performance we expect post pandemic.

FAQ on Turkey's vulnerability to Russia-Ukraine conflict

25 April 2022

The stability of key funding sources and credit stimulus limit the impact of key transmission channels from the conflict. Lira stability will be key to contain any further rise in inflation.

Emerging Markets - Global: Russia-Ukraine shock amplifies pandemic economic, fiscal scars for many sovereigns

21 April 2022

Government of Kenya - Rising energy prices increase cost of government’s fuel subsidy and slow pace of fiscal consolidation

18 April 2022


Efforts to attract private infrastructure investment are gaining ground, but scale remains a challenge

6 April 2022

Crowding-in private-sector investment will be crucial for emerging markets to meet their Sustainable Development Goals. Risk mitigation strategies are positive but the market seeks scale.

Broadening Russia-Ukraine shock weighs on credit profiles through multiple channels

31 March 2022

The ripple effects of the Russia-Ukraine conflict are spreading globally at a time when most sovereigns are still dealing with economic and fiscal scarring from the pandemic. The most exposed sovereigns are Poland, the Baltics and Moldova given their political risk exposure, as well as Commonwealth of Independent State sovereigns that face significantly lower growth and higher external vulnerability.


CBDCs can promote financial inclusion, stability; success depends on design, institutional credibility

22 March 2022

Emerging markets are increasingly considering implementing central bank digital currencies (CBDCs) as an alternative to cryptocurrencies and crypto assets, which are volatile and can threaten financial stability. However, even if still-nascent implementation efforts accelerate over the next year, it will take years before CBDCs become a key feature of the global financial architecture.

Sovereigns – Commonwealth of Independent States – Sharp recession in Russia poses immediate sustained risks to CIS credit quality

17 Mar 2022

The sharp deterioration in Russia's economy represents an acute shock for the region's external vulnerability risk, growth outlook and prospects for fiscal consolidation.

Sovereigns – Global: Central bank digital currencies offer sovereigns opportunity to improve policy effectiveness and economic performance

14 March 2022

While still far from wide adoption, particularly given limitations to technical infrastructure worldwide, a credible, widely accessible and reliable CBDC could support economic growth.

Government Policy – China – Two sessions aim for robust growth via targeted support; credit impact subject to policy implementation and transmission

11 March 2022

China’s ambitious growth target amid rising economic stress and external uncertainty to push up leverage, debt ratio; credit impact relies on growth outturn, effectiveness of implementation.

Sovereigns – Emerging & Frontier Markets: High food prices will exacerbate macroeconomic challenges, raise social risks; Middle East & Africa most exposed

14 March 2022

The disruption of food supplies from Russia and Ukraine is likely to further compound inflationary pressures in global food prices.

FAQ on credit implications and challenges posed by Russia-Ukraine military conflict

11 March 2022

The invasion of Ukraine has led to a steady deterioration in the ability and willingness of all three governments to repay debt, and will have long-term economic and fiscal consequences.

Government of Egypt - Global capital market disruptions will raise liquidity and external risks if sustained

9 March 2022

Sharply higher risk premia indicate that external market access on affordable terms is effectively interrupted and, if persistent, would increase liquidity risks.


Regional & Local Governments – China – Q4 2021 Debt and Finances Update

4 March 2022

Economic and fiscal metrics recovered and leverage increased, with outstanding RLG bonds exceeding RMB30 trillion for the first time.

Non-Investment Grade-Sovereigns – Global – Fiscal and debt metrics will remain weaker than pre-pandemic despite continued economic recovery; liquidity, external and social risks loom

2 March 2022

Rating actions in 2021 through 24 February 2022 were more balanced between negative and positive actions compared to 2020, although the pandemic continued to place downward pressure on non-investment-grade sovereign ratings.

Government of Russia: FAQ on sovereign debt service in Russia

1 March 2022

Ban on servicing new foreign-currency debt undermines institutional strength, a credit negative

Macroeconomics – Latin America: Inflation Will Stoke More Rate Hikes, Causing Stress Among Consumers And Other Debtors

16 February 2022

Sovereign – Russia & Ukraine: FAQ on heightened tensions and an outright conflict between Russia & Ukraine

8 February 2022

The risk that heightened tensions may culminate in a further military conflict have risen. We answer questions regarding the credit implications in a scenario in which tensions escalate.

Government of El Salvador: Liquidity and funding pressures remain high as Bitcoin bond issuance set for March

10 February 2022

Should the Bitcoin bond issuance fail, El Salvador would have to rely solely on multilateral financing and unconventional policy measures to raise funds to repay the 2023 bond.

High dollarization poses long-term risks for banks and for wider financial stability

7 February 2022

Dollarization is highest for banks in Latin America, emerging Europe and CIS.

FAQ on credit implications of Argentina's potential new agreement with the IMF

4 February 2022

Program targets under the potential new agreement with the IMF will likely fail and the program itself is unlikely to reverse the sovereign's debt restructuring needs.

Sovereigns – Hydrocarbon exporters: Strengthening global commitment to carbon transition increases longer-term credit risks.

11 January 2022

Quality of institutions and the capacity to adjust will determine the credit impact of carbon transition for hydrocarbon-reliant sovereigns.


Regional and local governments – Emerging markets: Widening infrastructure gaps present growing fiscal and social challenges

9 December 2021

Regional and local governments (RLGs) in South Africa, India, Russia and Mexico are likely to accelerate their capital expenditure (capex) after cuts triggered by the pandemic. However, infrastructure gaps have widened and progress will likely remain stalled absent greater external support

Demographic trends will drive divergence of growth and profitability prospects

8 December 2021

In the majority of emerging markets, banks will continue to benefit from the expansion of working-age populations. Yet the demographics of those countries pose their own risks for banks.

Tourism will recover unevenly through 2024 but region offers solid business prospects

7 December 2021

Pent-up demand for tourism offers good prospects for Latin America and the Caribbean's travel-related sectors in 2022 and beyond. Despite a lingering uneven recovery and the unknown implications of the Omicron variant, rekindled demand fortravel to the broader region will persist through 2022, with infection rates in the region declining through November 2021 and vaccinations accelerating in large markets.

FDI flows to emerging markets face structural headwinds, weighing on growth potential

6 December 2021

FDI inflows into emerging markets have fallen amid declining returns and weaker growth. With structural headwinds likely to prevent a reversal of this trend, growth potential may be weakened.

Corporates – Latin America & Caribbean: Deforestation intensifies reputational risk for companies operating in Brazil.

2 December 2021

Environmental damage to Brazil's biomes will have a substantial impact on Brazilian companies in coming years, rippling across different sectors and the wider economy.

Sovereigns – Western Balkans ESG credit impact is more pronounced for those countries exposed to social risks and with weaker governance

17 November 2021

Carbon Transition – Chile Credit effects of carbon transition weigh more on utilities than mining and forestry

17 November 2021

Credit impact of ESG stronger in SubSaharan Africa than in other EM regions

8 November 2021

Relative to other emerging market (EM) regions, environmental, social and governance (ESG) considerations present larger credit challenges to sovereigns in Sub-Saharan Africa. However, their overall impact on credit quality varies within the region depending on a sovereign's exposure to ESG risks.

Credit impact of ESG differs between oil exporters and importers

8 November 2021

Although the overall credit impact of ESG in the region is negative - as measured by our “credit impact scores” - there are wide variations reflecting both different levels of ESG exposure and varying capacities to deal with ESG-related risks.

Consolidation among small, inefficient banks will accelerate

8 November 2021

The pace of mergers and acquisitions among banks across parts of the developing world has quickened in recent years. We expect consolidation to continue over the coming quarters, particularly among the large numbers of small banks. This is because the pandemic has heightened the need to achieve economies of scale by accelerating technological change and by adding to strains from growing digital competition and rising compliance costs.


Demographic trends and governance failures compound water stress risks

4 November 2021

Demographic changes and weak governance will intensify water stress risks facing some regional and local governments (RLGs), particularly urban RLGs in emerging markets.


Sovereigns – Central and Eastern Europe & Baltics: Rising COVID-19 cases and low vaccination rates risk disrupting the recovery

28 October 2021


Problem loans will deteriorate moderately with limited impact on capital for most African banks

26 October 2021

Our modelling projects some rise in problem loan ratios throughout 2022; banks in Angola, Mauritius, Nigeria and South Africa are among those which could see the largest increase in asset risk in the region

Concessional and market-based financing vastly undershoots climate-resilience funding needs

26 October 2021

The capital investment needed by emerging market (EM) sovereigns to meet their climatetransition goals is significant. At the same time, the capacity of EM governments to invest in green initiatives is constrained, especially in the midst of the pandemic when almost all EM governments have seen a significant decline in fiscal revenue and an intensification in their spending pressures.

Common prosperity' agenda will create transition risks, with longer-term benefits if well implemented

20 October 2021

The government's plan to reduce income and wealth gaps will have profound practical implications, and therefore, far-reaching effects for many types of debt issuers.

Many sectors are adapting to net-zero transition independent of mandates

19 October 2021

Sectors that will be most affected by carbon transition are in many cases adopting their own transition measures independent of the implementation of national-level policies.

Moody's Investors Service

Policy challenges – South Africa: Financial, funding and social challenges elevate contagion risks for South African debt issuers

4 October 2021

Weak growth and social pressures will further weaken public-sector finances. Together with challenging funding conditions and high levels of interconnectedness, liquidity risks are elevated.

Moody's Investors Service

Cross-Sector – Argentina: Companies, utilities, sub-sovereigns struggle with inflation, weak growth in 2022

4 October 2021

Even as Argentina's economy recovers some ground in2022, macroeconomic imbalances and high inflation still pose substantial risk for companies, utilities and regional and local governments.

Moody's Investors Service

Cross-Sector – Brazil: Strong balance sheets and liquidity support credit quality by 2022 amid macro risks

4 October 2021

Decelerating GDP growth, higher interest rates and inflation will slow the positive momentum for Brazilian companies in 2022,but stronger balance sheets will support overall credit quality.

Doubling VAT alone is no quick-fix for Bahrain’s intensifying debt challenges

1 October 2021

Additional tax receipts of up to 1.8% of GDP per year will only partly address the government's significant challenge of arresting its growing debt burden, which amounts to over 130% of GDP.

China’s actions on Evergrande will likely avoid financial, social instability, but not without economic costs

27 September 2021

Chinese authorities will seek to avoid instability from Evergrande’s resolution to avoid widespread negative repercussions across the economy. However, some costs will likely be borne by the central and regional governments, some financial institutions and other property developers

Moody's Investors Service

Developments in Afghanistan threaten to raise geopolitical and economic risks for neighbouring countries

16 August 2021

Prolonged political instability in Afghanistan would result in a large numbers of refugees and potentially increase terrorist activity, raising geopolitical risks in neighbouring countries, particularly Pakistan, Tajikistan and Uzbekistan. This may weaken economic sentiment in those countries and weigh on foreign investment, with long-term implications for economic growth.

Moody's Investors Service

Droughts and water stress present growing physical climate risks in Mexico

12 August 2021

Water scarcity will limit hydroelectric power generation capacity, complicating efforts to achieve clean energy targets. Meanwhile, regional and local governments and water-intensive companies, including mining and beverage companies, will face higher capital spending costs as water stress increases over time.

Moody's Investors Service

Steel – Asia-Pacific: Bumpy transition to carbon neutrality signals divergence in credit quality

23 Jul 2021

Steelmakers face significant hurdles in reducing carbon emissions. Companies with higher margins, lower leverage and stronger liquidity are better placed to transition to greener technology.

Moody's Investors Service

Sovereigns – Global Scarring from COVID-19 pandemic will increase fiscal risks and social pressures

22 July 2021

Economic scarring from the coronavirus pandemic will have the most negative credit effects on sovereigns with narrowly focused economies and with limited ability to adapt.

Moody's Investors Service

Banks – Emerging Markets: Asset risk trends will diverge as new waves of virus blight recovery of some markets

20 Jul 2021

Nigeria, Turkey and Colombia will be hit hardest; China, India and Chile will be most resilient

Moody's Investors Service

Regional & Local Governments – China: Carbon transition will be uneven, with credit risks for provinces in northern China

07 July 2021

Provinces with large legacy carbon-emitting industries or exposure to coal mining and weaker fiscal and state-owned enterprise profiles will have most difficulty bearing cost of transition.

Moody's Investors Service

Sovereigns – Emerging Markets: Social safety nets support credit quality by improving response to shocks, reducing social tensions

10 June 2021

Well-targeted safety nets mitigate the severity of economic disruption and reduces social risks, but the availability and quality of these programs vary widely.

Moody's Investors Service

Integrated Oil & Gas – Russia: Higher oil prices, weak rouble will fuel oil majors’ 2021 EBITDA and leverage recovery

22 Apr 2021

The combined EBITDA of the four Russian oil majors we rate will grow by more than 25% in 2021 from a low base in 2020. This will bring leverage closer to pre-pandemic levels by year-end.

Moody's Investors Service

Retail & Restaurants – Latin America & Caribbean: E-commerce prospects, regional advantages offer gains especially for biggest operators

08 Apr 2021

Fragmented markets, large populations of unbanked citizens and low e-commerce penetration rates give retailers significant opportunities in Latin America coming years.

Moody's Investors Service

Banking System Outlook Update - India: Potential weakening of government ability to provide support drives negative outlook

25 Mar 2021

Our outlook for the Indian banking system is negative. This outlook expresses our expectation of how bank creditworthiness will evolve in the system over the next 12-18 months.

Moody's Investors Service

Sovereigns – Emerging Markets: Common Framework debt-relief application process reveals rising risks for private-sector creditors

10 June 2021

It is increasingly clear that official-sector lenders are intent on upholding the principle of comparable treatment of official and private creditors under Common Framework debt relief.

Moody's Investors Service

Banking System Outlook - Egypt: Stable outlook balances profitability and loan book pressures against sound liquidity and a stable government credit profile

25 Mar 2021

Our outlook for the Egyptian banking system is stable. The outlook expresses our expectation of how bank creditworthiness will evolve in this system over the next 12 to 18 months.