Reflecting on the dynamic global market of 2023, economic and socio-political events underscored volatility, spanning inflation, interest rate risks, currency fluctuations, and commodity price swings.

Despite a net improvement in 2021, credit quality witnessed a decline in 2023, with speculative-grade ratings accounting for 82% of downgrades, while investment-grade credits displayed resilience across sectors. Global defaults surged, notably in the U.S., attributed in part to heightened proportions of leveraged loans and debt issuers rated ‘CCC+’ and below.

African countries, including Nigeria, South Africa, Egypt, Morocco, Kenya, Ethiopia, and Ghana, experienced credit rating downgrades, driven by political instability, insecurity, and external vulnerabilities.

Amidst downgrades, sectors like Media and Entertainment thrived, benefiting from robust employment, healthy consumer spending, and post-COVID tailwinds. Bond issuance varied across sectors, with non-financial corporates witnessing an increase, structured finance decreasing, and financial services seeing a modest uptick.

Looking ahead, borrowers across all asset classes must adapt to tighter financing and softer economic conditions. Long-term yields are projected to peak midyear, with financing conditions expected to remain tight in real terms throughout 2024. Sectors reliant on consumer spending face heightened credit risks, except for investment-grade credits, which are anticipated to maintain resilience, barring the real estate sector.

Generally, the geopolitical landscape introduces uncertainties, driven by the prolonged Russia-Ukraine war and escalating risks in the Middle East. Navigating the intricate web of 2024 demands vigilance, adaptability, and strategic foresight.

Please note that the views expressed herein are adapted and do not represent those of DataPro Limited.