Sovereign Outlook 2026: Rising Geopolitical Tensions and Fiscal Headwinds
TL;DR
Scope Ratings' Sovereign Outlook 2026 identifies geopolitical tensions and fiscal challenges as major risks to sovereign credit, with Europe facing uncertainty from Russia-Ukraine issues and domestic political hurdles. Rating convergence is expected, benefiting lower-rated sovereigns but posing downsides for highly rated ones.
Tags
Scope Ratings' Sovereign Outlook 2026 highlights geopolitical tensions and fiscal headwinds as key factors influencing sovereign credit profiles. In Europe, uncertainty surrounding Russia-Ukraine ceasefire negotiations and military escalation poses significant economic, fiscal, and governance implications. Domestic factors, including challenging budgetary outlooks and political polarization, also hinder structural reforms. Rating risks outweigh potential gains from stronger growth and emerging fiscal resilience. The report notes a trend of rating convergence among investment-grade sovereign borrowers, with upside for previously lower-rated sovereigns and downside for highly rated ones.
