Sovereign Ratings Outlook September 2011  Citi

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Sovereign Ratings Outlook
September 2011
 This is a new regular publication which aims to anticipate changes in sovereign credit
ratings, and ratings outlook, for advanced economies.
 We expect a series of sovereign ratings downgrades among euro area countries in the
next 3-6 months, including Italy, Spain, Greece, Portugal and Cyprus. We also expect
Italy, Spain, Portugal and Ireland to be downgraded further over the longer term (next
2-3 years). Over the next 2-3 years, we also expect that France and Austria are likely to
be put on negative outlook, with Belgium at risk of a single notch downgrade.
 Over the longer term (next 2-3 years), we also expect that the sovereign ratings of the
US and Japan will be downgraded in response to adverse medium-term fiscal trends.
 We do not currently expect the UK to be downgraded or put on negative outlook in the
next few months or the longer term. But the UK is a relatively weak “AAA”, given the
sharp rise in the fiscal deficit over recent years, surging public debts, large banking
system, weak economic outlook and prospect that the deficit will overshoot official
forecasts. The UK’s rating could be at risk if the coalition falls apart or eases up on the
fiscal consolidation programme.
 We regard the smaller European countries (Switzerland, Sweden, Denmark and
Norway) as fairly solid AAAs for now, albeit with some concerns over the rising fiscal
deficit, sluggish housing market and poor export performance in Denmark.
 We do not expect any ratings upgrades among advanced economies, either over the
next few months or the next 2-3 years.