Moody’s Investors Service said in a recent report about sovereign credit worth in 2019 is, at the moment stable, paired with the global economy. Slowing growth momentum continues against rising uncertainty over credit conditions and financial firmness over the next year to mid 2020! A number of risk factors could affect three-quarters of the 138 sovereigns that Moody rates currently, although presently has a stable point of view. Fifteen hold a positive outlook. Nineteen sovereigns have a negative outlook, compared to 22 a year ago.
The unwavering viewpoint for sovereign ratings in 2019 weighs the benefits of continued global growth against rising domestic and geopolitical risk. Despite the stable overall view, they hold a more mindful resolve than in previous years, as the potential for shocks disrupting economic stability in the next 12-18 months is greater.
Moody’s expects G-20 growth to have peaked in 2018 at 3.3% before slowing to 2.9% in 2019. For advanced economies in the G-20, Moody’s believes growth will fall to 1.9% in 2019 from 2.3% in 2018, mirrored in key economies, including the U.S. and Germany. The picture in G-20 emerging markets is more varied: their growth in 2019 will be meaningfully slower in 2019 than in 2018, at around 4.6% against 5.0% in 2018.
The window is closing on global sovereigns to adequately resolve long standing high levels of public and private debt challenges, as well as those relating to ageing and inequality!
High debt, declining growth and an increase in interest rates expose sovereigns to the risk of shocks that undermine the availability and sustainability of debt. A number of new and border markets are particularly susceptible to the tightening of global financial conditions and increased trade protectionism in the United States.
Throughout the world, the long-term credit history of sovereigns will depend on the success of reform efforts that address these vulnerabilities.
As in previous years, the potential for domestic or geopolitical disruptive events represents the greatest risk of queuing. Geopolitical risks could have implications beyond the economic and fiscal fundamentals of a particular country and affect cross-border capital flows and, therefore, financing conditions for many sovereigns.
Geopolitical risk is a broad category that encompasses US trade and foreign policy which poses an increasingly far-reaching threat to global confidence and growth; conflict on the Korean peninsula; regional conflict in the Middle East; and ostensibly domestic political events, including Brexit and recent events in Italy all have a bearing on what kind of turn economies take within the 12 to 18 month time frame.
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