Global growth is gradually improving and oil and metals are recovering, but the cross-continent rise in political uncertainty and the hangover from two years of weak commodity prices means many countries still face intense pressures.
Roughly a quarter of the 120-130 countries the big rating agencies cover are at risk of a downgrade meaning the 8-year, post-financial crisis fall in credit quality is likely to continue.
S&P's negative outlooks now outnumber positive ones 30-to-7 or a ratio of 4:1, while for Fitch it is 6:1. The triple-A club is shrinking and the proportion of countries with an investment grade BBB- or above with S&P is at an all-time low 52 percent.
For the first time in a decade Europe is starting a year with more positive rating outlooks than negative ones, but Italy remains an outlier and its review by DBRS this week is likely to be one of the most closely watched of 2017.
The Canadian agency is one of the four used by the European Central Bank and a downgrade would see the ECB increase the 'haircut' it applies to Italian bonds, piling extra stress on the country's banks that rely on its interest-free funding.
An S&P Capital IQ model using credit default swaps shows markets currently price Italy a full four notches below DBRS' A (low) rating a statistic that would normally point to a cut.
DBRS' head analyst Fergus McCormick, however, who will help make its decision on Friday, has been reassured by plans to shore up battered bank Monte dei Paschi and doesn't expect the country to rush to early elections.
"The key now is whether the government’s burden-sharing precautionary recapitalization will restore investor confidence in the entire Italian banking system," he told Reuters, adding decisions on the country's electoral law before the end of the month will be "critical" to the political outlook.
Friday will also be a big day for Portugal which is set to be reviewed by Moody's as market pressures rise again there.. Poland is also on its list, while Fitch rates Iceland which is lifting capital controls but has just taken two months to form a government.
Jan. 27 looks busy too with Moody's getting its first chance to resolve its negative outlook on Brexit-bound Britain and Fitch rating Turkey where the lira is in virtual freefall amid worries about its government and economy.
GOING SOUTH
Seen as greatly at risk of falling out of the key investment grade group is South Africa, which is struggling with government division and a limping economy that accounts for a roughly a third of sub-Saharan Africa's GDP.
S&P which has been on the brink at BBB- negative for over a year won't formally review it until June 2. Moody's which has it a notch higher is scheduled for April 7, while Fitch which is at the same key level as S&P should be sometime between the two.
All three are watching to see whether economy falls into recession and if the prized independence of its central bank or finance minister are compromised by political forces. At the same time, the models that point a cut to Italy this week, predict a monster 2-3 notch cut in South Africa's case.
"We expect South Africa to be downgraded," said Aberdeen Asset Management EM portfolio manager Viktor Szabo, "It's not a certainty, but the main reason is still there and he's called Jacob Zuma."
It is Latin America now however that has the largest number of negative outlooks at 12 in the case of S&P.
And even though Europe looks better for once, there are warnings it could quickly sour again with German, French, Dutch and potentially Italian elections looming not to mention Brexit.
"The possibility of unexpected political outcomes, could lead to sharp policy shifts in euro zone member states with implications for sovereign ratings," S&P's top sovereign analyst Moritz Kraemer said.
(Reporting by Marc Jones; Editing by Raissa Kasolowsky)
By Marc Jones
