OREANDA-NEWS. Fitch Ratings says in a new report that the Rating Outlook for global (non-US) local and regional governments (LRGs) in 2016 is generally Stable although in some countries LRGs may be exposed to increasing budgetary pressures.

Eurozone local and regional governments (LRGs) may benefit from improving economic trends while sovereign fiscal adjustments pave the way for LRGs budgetary discipline and debt stabilisation. However, LRGs continue to face budgetary pressure from dynamic public spending, some territorial reforms, notably in France and Italy, and the budgetary paradox whereby LRGs are required to both participate in the national deficit and debt reduction plans while continuing to implement capital spending plans.

Russian LRGs' ratings are likely to remain under pressure in 2016 following negative debt metrics dynamics and weakened fiscal performance. Fitch projects aggregated direct risk to reach 29% of total revenue at end-2015, while revenue growth will slow in 2016.

Fitch's Outlooks for Polish LRGs is Positive, driven mainly by expected sound operating performance and diminishing debt. We maintain a Stable Outlook for Turkish LRGs, as their budgetary performance remains sound.

The ratings of Brazilian LRGs are mainly correlated with those of the sovereign, but a restructuring process is expected to result in LRGs having to adjust expenditures to fallen revenues in 2016. The Outlook for Mexican LRGs for 2016 is Stable amid economic challenges at the national and international levels, following an expected negative impact for 2015 on federal revenue-sharing. Also in Colombia, LRGs' tax bases will be challenged in 2016
The Outlook for Canadian LRGs in 2016 is Stable overall, even as individual provinces' performance diverges. Rising US demand and favourable exchange rate trends will continue to support slow growth in central Canada and British Columbia, even as weakness in the resource sector weighs on the commodity-dependent prairie provinces.

In China, LRGs are likely to face more fiscal pressure in 2016 against the backdrop of slower economic growth and contracting land sales. Nevertheless, the Chinese LRG debt swap programme and other major LRG reform policies are expected to ease LRGs' refinancing risks, alleviate interest burden and build a better fundamental framework for Chinese subnationals.

In Australia, economic drivers differ between the six states and two territories. However, all regions benefit from sustained national economic growth, notably in housing, strong governance and effective public and social institutions. Nevertheless, lower commodity prices may impact royalty revenues in some states. Fitch's Outlook for New Zealand LRGs is Stable, reflecting a strong institutional framework, manageable expenditure pressures, a sound economy and modest debt levels.

LRGs' ratings are, however, sensitive to factors such as a sharper revenue volatility which could derive from slower growth prospects or further changes in commodity prices or housing market corrections.