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Moody's Predicts Negative Outlook for Global Sovereign Ratings for Next Year

© REUTERS / Mike Segar/FilesMoody's sign
Moody's sign - Sputnik International
The Moody's credit rating agency has issued a global negative outlook for sovereign ratings for next year and a half.

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MOSCOW (Sputnik) — The Moody's credit rating agency predicted a global negative outlook for sovereign ratings in the upcoming 12 to 18 months due to a combination of sustained low growth and other economic and political factors on Monday.

"The outlook for sovereign ratings globally for the coming 12 to 18 months is negative…The key drivers of the negative outlook are a combination of continued low growth, a shift towards fiscal stimulus that will increase already high public sector debt, and rising political and geopolitical risks," Moody's said in its annual Global Sovereign Outlook.

Out of Moody's 134 rated sovereigns, 26 percent carry negative outlook compared to 17 percent last year, while 65 percent carry a stable outlook and 9 percent only have a positive outlook.

Moody's said that the shift toward looser fiscal policy by many governments threatens the creditworthiness of many sovereigns given the already elevated debt levels and any increase in debt to finance spending would be negative on the long run.

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Another economic factor for the negative outlook is the possibility of a significant and sustained reversal of global capital flows away from emerging markets which depend highly on foreign capital which could have severe affects on those countries.

As for the political factors, Moody's predicts an increasing risks of policy inertia and reversal, including policies that were beneficial to the world's economy by facilitating and improving global trade, in addition to many geopolitical unrest rising in many regions as well.

The risks could mainly come as a result of latest US presidential elections and the fiscal policy that will be adapted by the new administration and the Brexit vote in the United Kingdom to leave the European Union, which poses the threat of a possible further fragmentation in Europe. Following the Brexit, many commodity-exporting countries will have to adjust their growth expectations and public finances to less favorable external conditions.

Moody is one of the major credit rating companies in the world, that provides research on bonds issued by commercial and government entities.

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