Sovereign defaults hit record level in 2020: Fitch

By James Langton | June 8, 2021 | Last updated on June 8, 2021
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In the face of an unprecedented global pandemic, sovereign defaults hit record levels in 2020, Fitch Ratings reports.

The rating agency said that five rated sovereigns defaulted in 2020, up from just one default the previous year. As a result, the sovereign default rate more than tripled to 4.2% in 2020 from 0.9% in 2019.

The previous record high was 1.8% in both 2016 and 2017, Fitch noted.

“The sovereign issuer-based default rate rose to a record high in 2020 against a backdrop of weakened sovereign credit profiles due to the Covid-19 pandemic,” Fitch said.

Additionally, Fitch downgraded 32 sovereigns in 2020, and made only two upgrades.

“The scale and breadth of the pandemic’s economic impact and of governments’ policy responses put widespread pressure on sovereign ratings,” the rating agency said.

The downgrade-to-upgrade ratio of 16:1 in 2020 compares with a ratio of 7:1 during the global financial crisis, Fitch noted.

So far this year, Fitch has downgraded three more sovereigns, and made no upgrades.

Yet, in terms of rating outlooks, Fitch has so far upped the outlooks of five sovereigns to stable from negative, and moved three others to positive from stable. Only one sovereign has a negative outlook.

“Downgrade pressures have eased this year, but our ratings indicate that more defaults are possible,” Fitch said, noting that 11 sovereigns remain rated lower than B-.

“Pockets of stress following the increase in external borrowing by emerging market sovereigns could lead to further missed payments, with smaller and low-rated frontier markets most exposed to rising U.S. bond yields,” the rating agency said.

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.