S&P Global Ratings downgraded 12 Emerging Market (EM) sovereigns and upgraded seven others in 2018, representing $399bn and $123bn in rated debt, respectively. It downgraded one EM sovereign in the first quarter of 2018, with $230bn in affected bonds, four EM sovereigns in each of the second and the third quarters ($3bn each), and three sovereigns in the fourth quarter ($163bn). It added that Latin America accounted for 58.3% of the number of EM sovereign downgrades, followed by Eastern Europe, the Middle East & Africa (EEMEA) region with 25% of downgrades, and Asia excluding Japan with 16.7% of total EM downgrades last year. In parallel, S&P upgraded one EM sovereign in each of the first and the second quarters of 2018, with amounts of $73bn and $11bn affected, respectively. It also upgraded three sovereigns in the third quarter ($29bn) and two others in the fourth quarter ($10bn) of 2018. It indicated that the EEMEA region accounted for 71.4% of EM sovereign upgrades, while Asia excluding Japan and Latin America represented 14.3% each of the total last year. It considered that several risks threaten the stability of EM sovereign ratings this year, including tensions surrounding global trade, volatility in the financial markets, as well as the potential impact of higher global interest rates and a stronger US dollar on EM capital flows.
Source: S&P Global Ratings

BNP Paribas projected Algeria's real GDP growth to accelerate from 2.5% in 2018 to 2.8% in 2019 and to reach 2.2% in 2020. It considered that the government's policy aims to stabilize the country's macroeconomic situation that significantly deteriorated in 2017, instead of supporting domestic demand. It added that the authorities' prudent monetary policy and administered prices have contained inflationary pressure from the monetization of the fiscal deficit that started in late 2017, following the depletion of assets in the oil stabilization fund. It said that the government is facing the risk of a "painful" medium-term macroeconomic adjustment, either through the depreciation of the exchange rate or import controls, which would have a severe impact on inflation. It forecast the average inflation rate to increase from 4.4% in 2018 to 5% annually during the 2019-20 period.

Further, BNP Paribas indicated that the budget for 2019 maintains the current subsidy system and does not incorporate any additional taxes. It noted that the fiscal breakeven oil price stands at more than $90 p/b, which it considered as unreachable amid the current fundamentals in the oil market. It projected the fiscal deficit to widen from 5.2% of GDP in 2018 to 7.7% of GDP in 2019, while it forecast the government's debt level to rise from 43% of GDP at the end of 2018 to 48% of GDP at end-2019. 

In parallel, BNP Paribas expected the current account deficit to widen from 7.6% of GDP in 2018 to an average of 11% of GDP annually in the 2019-20 period, due to lower hydrocarbon prices. It anticipated Algeria's external liquidity to remain under pressure in the near term due to lower hydrocarbon export receipts, the authorities' refusal to borrow externally and the country's unattractive business climate. In this context, it forecast foreign currency reserves to decline from $83bn, or 16.2 months of import cover, in 2018 to $48bn, or 9.2 months of imports, in 2020.
Source: BNP Paribas

Fitch Ratings affirmed the long-term Issuer Default Ratings (IDRs) of First Abu Dhabi Bank (FAB) and HSBC Bank Middle East at 'AA-', the ratings of Emirates NBD, Abu Dhabi Commercial Bank (ADCB), Union National Bank (UNB) and Al Hilal Bank (AHB) at 'A+', and the IDRs of Dubai Islamic Bank (DIB) at 'A'. It added that the outlook on all the banks' ratings is 'stable'. It said that the IDRs of HSBC Bank Middle East reflect a strong probability of institutional support from its parent, HSBC Holdings, if needed. It indicated that the ratings on the remaining banks are driven by the government's strong capacity and willingness to support banks. It noted that the high probability of support is underpinned by the UAE's sovereign wealth funds and sustained revenues from hydrocarbon output, as well as by the moderate size of the banking sector relative to the country's GDP. It added that the planned merger of ADCB with UNB and the acquisition of AHB will be credit neutral for the three entities, as the transaction will not affect their IDRs. However, Fitch noted that it will change its support assessment for the government owned AHB from sovereign to institutional, once the acquisition is completed. In parallel, the agency maintained the Viability Ratings (VRs) of FAB at 'a-', of HSBC Bank Middle East at 'bbb', of DIB, Emirates NBD and ADCB at 'bb+', and the VR of AHB at 'b+'. Also, it placed the 'bbb-' VR of UNB on Rating Watch Negative following the announcement of the merger with ADCB that has a lower VR. 
Source: Fitch Ratings