Recent Rating Trends: Negative Actions Outnumber Positive So Far In 2024

• About 90% of S&P Global Ratings rated Local and Regional Governments (LRGs) are currently rated in the investment grade category, with the majority of those coming from Europe, Australia and New Zealand, and Canada.
• So far in 2024, negative rating actions outpace positive actions globally. Negative rating actions are mainly driven by several downgrades and outlook revisions in New Zealand and France.
• In EMEA, positive rating actions outpace negative. We observe upward pressure in Sweden, Switzerland and Spain thanks to solid economic performance and strong revenue, and in Bulgaria and Croatia thanks to their accession to the eurozone. We also revised the outlook to positive on the State of Baden-Wuertemberg on expected stronger budgetary prospects. However, we have revised our outlook to negative on the State of Saxony on potential weaker budgetary performance, downgraded Brussels on increased deficits and higher debt burden, and downgraded six French LRGs, following the sovereign downgrade.
• Latin American LRG ratings remain volatile. In 2023, we lowered Argentine's transfer and convertibility assessment, which led us to downgrade eight Argentinian provinces in 2023. This reverted in 2024, with eight provinces being upgraded to 'CCC' on lower transfer and convertibility risks, as foreign exchange restrictions ease. We also upgraded two LRGs in Brazil, the State of Santa Catarina on stronger financial performance thanks to more prudent fiscal policies, and the city of Niteroi following the upgrade of the sovereign.
• Recent rating movements in APAC region have been mostly negative. Since July 2023 S&P has downgraded the Government of Australian Capital Territory and two district councils in New Zealand on expected weaker budgetary performance. Additionally, the outlooks on four New Zealand LRG ratings were revised to negative in late 2023 on weaker budgetary performance. A further fifteen LRG outlooks were revised to negative due to the revision of the trend on the institutional framework for New Zealand local councils to weakening from stable in February 2024. Twenty-one out of our twenty-five LRGs ratings in New Zealand have negative outlooks.
• Canadian provinces' performance is variable as they have greater autonomy to define their financial policy. Since July 2023, we have revised the outlook to positive on two LRGs, City of Edmonton and the Province of Prince Edward Island, on the back of potential stronger budgetary performance. Furthermore, the ratings on the Province of Alberta were upgraded on outsize financial performance stemming from higher oil prices and cost containment efforts. We also downgraded the Province of British Columbia on continued fiscal performance weakening and revised the outlook to negative on the City of Regina on capital-driven increase in after-capital deficits and rising debt burden.

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