Rating agency Fitch Ratings expect challenges for banks in emerging markets next year due to a difficult macroeconomic environment. In a statement, Fitch Ratings said slower economic growth, high inflation, and weaker currencies will impair some borrowers’ repayment capacity and pressure banks’ asset quality. The agency also warned that further interest rate increases can also drive losses on emerging market banks’ securities books, offsetting margin gains. The average ratio of public debt to gross domestic product, which is a key measure of a country’s fiscal health, rose to a record 67% last year in emerging market countries, the IMF said in its Global Financial Stability report in April.
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