Fitch Ratings - Global sovereign credit conditions are broadly neutral for 2024, as moderately weaker global economic growth and persistent strains on public finances are balanced by lower inflation and some easing in financial conditions, Fitch Ratings says in its Global Sovereigns Mid-Year Outlook 2024. Risks to the outlook centre on potential setbacks to disinflation and financing conditions, fiscal positions and geopolitics.

Further setbacks to the disinflation path in the US could constrain the Federal Reserve from cutting rates, with adverse implications for global bond yields and increase upward pressure on the US dollar. Such a combination could weigh on this year’s improvement in emerging-market financing conditions evident in a narrowing in bond spreads and re-access of international bond markets by some low-rated sovereigns. Continued access to IMF funding will be important for distressed frontier markets.

Sovereign interest costs are continuing to rise, particularly for developed markets, as debt stocks amortise and are refinanced at current bond market yields. These and broader expenditure pressures mean we forecast a stalling in post-pandemic improvements in median budget deficits (at 2.8% of GDP) and government debt/GDP (at 55.2%) this year.

Geopolitical risks - including war in Ukraine and the Middle East, US-China rivalry and more protectionist trade and industrial policies - are likely to persist.