Latest news with #fiscalconsolidation
Khaleej Times
4 days ago
- Business
- Khaleej Times
S&P upgrades India rating, despite US tariff threats
S&P upgraded India's long-term sovereign credit rating on Thursday, with the agency citing New Delhi's "commitment to fiscal consolidation" and its "buoyant economic growth". The US ratings agency said it was upgrading the world's fifth-largest economy from BBB- to BBB, adding that it expects the impact of US President Donald Trump's tariff blitz on India to be "manageable". The outlook on the long-term rating, S&P noted, is "stable". "The upgrade of India reflects its buoyant economic growth, against the backdrop of an enhanced monetary policy environment that anchors inflationary expectations," S&P said in a statement. "Together with the government's commitment to fiscal consolidation and efforts to improve spending quality, we believe these factors have coalesced to benefit credit metrics." While India remains the world's fastest-growing major economy, there has recently been a slowdown in urban demand and muted government expenditure. The Indian economy expanded at its slowest pace in four years in the fiscal year that ended in March 2025. New Delhi's economic outlook has also been darkened in recent weeks by Trump's decision to punish its purchases of Russian oil by threatening to increase tariffs from 25 percent to 50 percent. But S&P believes that India's growth prospects won't be thrown off course as a result of Trump's chaotic trade policies, noting that even the 50 percent tariffs would not "pose a material drag on growth". "India is relatively less reliant on trade and about 60 percent of its economic growth stems from domestic consumption," the agency's statement said. "Factoring in sectoral exemptions on pharmaceuticals and consumer electronics, the exposure of Indian exports subjected to tariffs is lower at 1.2 percent of GDP," it added. "Though this may eventually result in a one-off hit to growth, we envisage the overall impact to be marginal and will not derail India's long-term growth prospects." It added that even if India had to switch from importing Russian oil, the fiscal cost would be "modest" given the "narrow price differential between Russian crude and current international benchmarks".
Yahoo
4 days ago
- Business
- Yahoo
S&P upgrades India rating on economic resilience, sustained fiscal consolidation
By Swati Bhat MUMBAI (Reuters) -Credit rating agency S&P Global upgraded India's long-term unsolicited sovereign credit ratings to "BBB" from "BBB-" on Thursday, citing economic resilience and sustained fiscal consolidation. The agency had revised the outlook on India's rating in May last year to positive from stable on robust growth and improved quality of government expenditure. "The upgrade of India reflects its buoyant economic growth, against the backdrop of an enhanced monetary policy environment that anchors inflationary expectations," the rating agency said in a statement. "Together with the government's commitment to fiscal consolidation and efforts to improve spending quality, we believe these factors have coalesced to benefit credit metrics," it added. The Indian rupee strengthened to 87.58 against the dollar from 87.66, while the benchmark 10-year bond yield fell 7 basis points to 6.38% soon after the announcement. The rating agency also revised its transfer and convertibility assessment to 'A-' from 'BBB+', it said. S&P may lower the country's ratings if it sees an erosion of political commitment to consolidate public finances, while downward pressure could also come from economic growth slowing materially on a structural basis such that it undermines fiscal sustainability, it said. Ratings could be further raised if fiscal deficits narrow meaningfully such that the net change in general government debt falls below 6% of GDP on a structural basis, it added. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Reuters
4 days ago
- Business
- Reuters
VIEW S&P Global upgrades India's sovereign credit ratings to "BBB"
Aug 14 (Reuters) - Credit ratings agency S&P Global upgraded India's long-term unsolicited sovereign credit ratings to "BBB" from "BBB-" on Thursday, citing economic resilience and sustained fiscal consolidation. COMMENTARY: This will boost debt inflows and ease worries over the long-duration bond rally faltering due to dwindling demand from banks. The development could bring in long-term tactical and strategic inflows and support sentiment in debt markets. For equities, it is a minor sentimental positive and a reassurance of strength in domestic economy. S&P's upgrade of India's rating from BBB- to BBB is certainly a welcome development — but it is also, by any reasonable measure, too little and too late. What market participants and India-watchers have long recognised is only now being acknowledged by the rating agencies. The reality is that India's economic and financial dynamism has far outpaced its perceived credit risk. The positive trajectory of Indian equities and other asset classes is likely to continue, propelled by the same structural strengths that have underpinned their outperformance for years — irrespective of the verdicts handed down by credit rating agencies. India has maintained strong fiscal discipline in recent years, keeping the current account deficit within a manageable range. This, along with robust domestic macros and a growth-supportive monetary stance from the RBI, has underpinned S&P's upgrade from BBB– to BBB positive. Near-term tariffs may impact select companies, but they pose little threat to long-term GDP growth. The government's consistent and strong commitment to fiscal consolidation along with a focus on debt sustainability and superior macro stability has been the key factor driving India's rating upgrade. The government in last few years has perhaps shown the most aggressive fiscal consolidation among global peers along with efforts to enhance supply side of economy that has yielded benefit in terms of low and stable inflation. All this feeds into India's rating upgrade. The upgrade is a reflection of the efforts to ensure macroeconomic stability and the resilience of the balance sheet of all economic agents. The upgrade will impact asset classes across the board and will help draw quality flows to the market. The move by S&P to upgrade India reflects improvement in fiscal metrics led by the centre sticking to its fiscal consolidation path post the COVID19 shock. Other metrics such as external debt to GDP, current account deficit, growth and inflation was on a strong footing compared to other BBB rated countries TERESA JOHN, LEAD ECONOMIST, NIRMAL BANK INSTITUTIONAL EQUITIES, MUMBAI The rating upgrade reflects India's stable macroeconomic fundamentals and will be positive for bond yields, which have seen some uptick of late. We continue to expect 25-50bps of rate cuts on the back of inflation likely undershooting RBI's forecasts and a cyclical growth slowdown amid trade tensions. Stable macrofundamentals also provide room for some countercyclical policy easing.
Yahoo
21-07-2025
- Business
- Yahoo
France: Multi-year Budget Plan Supports Fiscal Outlook but Great Uncertainty Remains
The French government affirmed its commitment to stabilise the public debt trajectory by 2029 through savings and supply-side reforms, following two years of budgetary slippage that resulted in a budget deficit of 5.8% of GDP in 2024, the highest in the euro area. Under Prime Minister François Bayrou's EUR 44bn of measures for the 2026 Budget (equivalent to around 1.5% of GDP), the government plans to keep public spending unchanged relative to 2025 levels, excluding military expenditure and interest payments. According to the plan, this will be achieved primarily through a nominal freeze on social benefits (including pensions) and income tax bands, alongside local government savings. If fully implemented – which is unlikely in the view of Scope Ratings (Scope) – the government's plan would reduce the budget deficit from an expected 5.4% in 2025 to 4.6% in 2026 and 2.8% in 2029. Instead, Scope expects a much more constrained and gradual fiscal consolidation path with the budget deficit still at 5% of GDP in 2027 and 4% in 2030 (Figure 1). This is because the impact of the savings plan on the headline deficit will be partially offset by the steady increase in net interest payments, from less than 4% of government revenue in 2024 to more than 6% by 2030. So, while the primary deficit is expected to return to its pre-Covid level of less than 1% of GDP by 2030, the headline deficit will remain elevated around 4% of GDP. Figure 1. Large primary deficits, rising interest payments weigh on the fiscal outlook % of GDP Savings Challenged by Economic Slowdown, Parliamentary Fragmentation and Rising Defence Expenditure The prime minister's measures to support domestic production include the elimination of two bank holidays, the reduction of red tape for businesses and greater labour market flexibility through upcoming negotiations with social partners on the unemployment benefits system. However, the introduction of ambitious structural reforms to support GDP growth, estimated at around 1% annually, appears unlikely in the near term. Modest economic momentum will weigh on the social acceptability of economic and budgetary reforms. Scope projects real GDP growth of 0.8% on average in 2025-26, after 1.1% in 2024, amid external headwinds including the United States's trade policies. In addition, the lack of a parliamentary majority since the 2022 legislative elections, the fragmented political landscape and heightened political polarisation following the 2024 dissolution of the National Assembly raise further uncertainties about the government's ability to implement its saving plans for 2026. Parliamentary discussions are expected to be challenged by difficult budgetary trade-offs to compensate for higher defence expenditures, projected to reach EUR 64bn in 2027 or about 2% of GDP. Discussions around the 2023 pension reform following this year's negotiations with social partners could also complicate the parliamentary debate. The need to strike a political compromise on the proposed economic and budgetary reforms will likely lead the government to water down some of its measures to appease political opposition, at the risk of missing next year's deficit targets. Conversely, relying on Article 49.3 of the Constitution to pass the 2026 Budget without a parliamentary vote will raise the risk of renewed political instability, following the collapse of the former government in December 2024. A successful no-confidence vote against the prime minister and/or early elections would undermine near-term fiscal consolidation. Political Hurdles Compound Uncertainties Around the Government's Saving Plan Upcoming elections – municipal elections in March 2026 and presidential elections in April-May 2027 – raise further uncertainties about budgetary efforts over the medium term. Reducing the deficit to below 3% of GDP by 2029 would require a savings plan of more than EUR 100bn, according to the French Court of Auditors. This is unlikely, given the uncertainty surrounding the policy agenda after the 2027 presidential elections. Figure 2. Large budget deficits, uncertain consolidation plan weigh on France's debt trajectory % of GDP Balancing the government's savings plan and the uncertainties around its implementation over the coming years, Scope believes general government debt to GDP will increase from about 113% in 2024 to 122% in 2030 (Figure 2). This would be one of the largest public debt increases among highly indebted developed countries, including Belgium, the United Kingdom and the United States. For a look at all of today's economic events, check out our economic calendar. Thomas Gillet is a Director in Sovereign and Public Sector ratings at Scope Ratings. Brian Marly, Senior Analyst in sovereign ratings at Scope, contributed to drafting this article. This article was originally posted on FX Empire More From FXEMPIRE: Navigating China's Economic Challenges: A Q&A with Scope Ratings' Dennis Shen Buy Like Big Money: Carpenter Technology Soars Buy Like Big Money: Bentley Systems Lifting Off SoFi Shares See Huge Bullish Signal, Could Rise More Identify Superstar Stocks Like DoorDash Before the Crowd Identify Superstar Stocks Like American Superconductor Early
Bloomberg
18-07-2025
- Business
- Bloomberg
EU Countries to Give Initial Verdict on Contentious Budget
Welcome to the Brussels Edition, Bloomberg's daily briefing on what matters most in the heart of the European Union. We're keen to hear your views on this newsletter. Please participate in our short survey. European Affairs ministers meet today in Brussels to share initial feedback on the Commission's contentious proposal for the EU's long-term budget. Germany swiftly rejected the plan unveiled on Wednesday, saying the €2 trillion headline figure was too high at a time when many nations are striving for fiscal consolidation. Speaking during a visit to London yesterday, Chancellor Friedrich Merz said the EU must do more with the money it has and rejected a proposed levy on companies, setting up a clash with Commission president and fellow German Christian Democrat Ursula von der Leyen. Another point of contention is likely to be a €400 billion crisis tool, set to be backed by joint borrowing — a controversial mechanism that has long met resistance from Berlin and like-minded fiscal hawks.
