UPDATE 1-More small emerging market defaults 'probable' in 2023 - Fitch

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JOHANNESBURG, Nov 21 (Reuters) - More sovereign defaults are "probable" next year among small emerging market countries, ratings agency Fitch said in its 2023 outlook on Monday, citing a likelihood of sudden jumps in borrowing costs, loss of market access and urgent funding needs.

Meanwhile the Group of 20 leading economies' debt restructuring process, the Common Framework, which is underway in Zambia and Ethiopia and has concluded in Chad, has proven ineffective at faciliating restructurings and is unlikely to improve next year, the ratings agency added.

Dozens of emerging countries, especially smaller and riskier ones referred to as frontier markets, have seen their borrowing costs soar to unaffordable levels in 2022 as the U.S. Federal Reserve has embarked on a hiking cycle in an effort to contain soaring inflation in the wake of Russia's invasion of Ukraine and ongoing COVID-19 lockdowns in China.

Sri Lanka defaulted on its debt earlier this year, while other countries including Egypt, Tunisia and Ghana have sought help from the International Monetary Fund.

"International bond market access will remain a challenge for small and frontier EMs, and more defaults are probable," the Fitch report said. "As in 2022, there will be cases of more urgent funding challenges in smaller and frontier EMs."

A greater share of emerging markets had a positive credit rating outlook compared to developed markets for the first time since 2018, Fitch said.

Nonetheless, 2022 was the second worst year for emerging market downgrades, the ratings agency said in a statement accompanying the report.

"Geopolitical risks remain high. There is as yet no clear path towards reconciliation for Russia and Ukraine, and similarly for China-U.S. relations," the statement said.

"Supply chains of traded goods effectively transmit the risks and consequences of these conflicts globally." (Reporting by Rachel Savage, Editing by Karin Strohecker and Gareth Jones)