Weiss Ratings: Sluggish Demand Triggers Downgrades of China, Canada, Saudi Arabia

JUPITER, Florida (December 19, 2011) — China, Canada, and Saudi Arabia face sluggish global demand, triggering a downgrade in sovereign debt by Weiss Ratings, an independent rating agency of U.S. financial institutions and sovereign debts.

Alternatively, Weiss upgraded the sovereign debt of India and Singapore as their economies improve despite global economic challenges. At the same time, Weiss confirms the U.S. sovereign debt rating remains unchanged at C-.

Weiss’ sovereign debt rating changes are as follows:

China’s growth has eased in response to waning global demand for exports along with its own efforts to slow inflation. The reduction in China’s economic expansion appears to concern the government enough that its central bank has announced cuts in banks’ reserve requirements.  This move is expected to bolster lending, suggesting that the government is relaxing control over inflation as concerns rise about its ability to manage a slowdown.

With slower-than-expected economic growth and rising unemployment, Canada faces difficulties in achieving its goal of a balanced budget. Due to its substantial business ties with both the U.S. and Europe, it cannot avoid the effects of the global financial crisis. In addition, economic uncertainty and reduced government receipts are creating questions about stability.

Even as Saudi Arabia commits to oil pricing stability, the global financial crisis and the effects of the “Arab Spring” weigh on the country’s economy. World markets are not as confident as they once were toward Saudi Arabia, resulting in increased credit default swap (CDS) pricing. Despite these concerns and reductions expected in the production of crude oil, Saudi Arabia’s economic forecast is for continued growth based on solid private and government spending.

On a more positive note, both India and Singapore are seeing areas of economic improvement. India has experienced a slowdown in its economy following a period of rising interest rates and reduced global demand. After India’s meteoric growth in the recent past and rising inflation, investor confidence has slipped and the rupee is coming under pressure. However, the benefits of more controlled economic growth and the ability to leverage the country’s weak currency for exports outweigh the inherent risks of slowing investment and weaker demand.

Singapore’s conservative approach to debt, coupled with solid growth, undesrpin a positive economic picture. Despite this outlook, it is not immune to the overall global economy, and the expectation of slower growth during 2012. Singapore’s challenge will be maintaining low inflation, strong reserves and attractiveness as a center for banking.

Weiss Ratings senior financial analyst Gavin Magor commented: “It is clear that in a global economy, no matter how prudent a country’s internal financial management, it will eventually be affected. How these countries react will be key, including whether leaders have the determination to address potential issues before they cause serious problems.”

Weiss Sovereign Debt Ratings cover 50 countries. For more information on the Weiss Ratings approach, refer to our white paper, "Introducing the Weiss Sovereign Debt Ratings."

 

About Weiss Ratings

Weiss Ratings, the nation’s leading independent provider of bank, credit union and insurance company financial strength ratings and sovereign debt ratings, accepts no payments for its ratings from rated institutions.  It also distributes independent investment ratings on the shares of thousands of publicly traded companies, mutual funds, closed-end funds and ETFs.

 

For more information contact:

Maryellen Murphy
561.818.8885
mmurphy@weissinc.com