Global Economy will Remain Fragile in 2020: Moody’s

NEW DELHI: Global credit conditions in 2020 will weaken as a result of growing risks of an economic downturn, trade policy uncertainty and the effects of an unpredictable political and geopolitical environment, Moody’s Investors Service said on Tuesday.

Although Moody’s does not expect a recession in 2020, recession risks are building, the report said.

The global economy has witnessed the lowest global growth in 2019 since the 2009 recession.

Risks will be centred around US-China trade disputes, Brexit-related uncertainty and the escalation of other bilateral disputes. At the sector level, spillover effects from trade frictions will drive shifts in global supply chains and weigh on investment decisions, Moody’s noted. Furthermore, sporadic episodes of heightened financial market volatility will flare up as long as trade uncertainty lingers.

Other risks to the global economy relate to high leverage and the historically high number of debt issuers with weak credit quality accessing the credit markets.

“Recession risks will remain elevated in Europe and the US, while in China domestic rebalancing will continue to create challenges in maintaining the country’s rapid growth,” Moody’s noted.

Moody’s expects interest rates to remain low and yield curves to remain flat for several years going forward, with mixed credit effects by sector.

Low rates will keep borrowing costs attractive for sovereigns and companies but will create a difficult operating environment for banks and insurers. Moreover, low rates will also continue to encourage risk taking as investors reach for yield. (IANS)

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