Rising geopolitical tensions around the world and slowing growth trends and declining interest rates in developed markets are among the top risks to global credit conditions, S&P Global Ratings said Oct. 1.
Heightened uncertainty stemming from the U.S.-China trade dispute, Brexit, U.S.-Iran tensions and the rift between Japan and South Korea weigh on business and consumer confidence, undermining global growth prospects.
There are also concerns about declining GDP growth trends in the U.S. and China, low inflation and negative interest rates in Europe and Japan.
In addition, slowing growth and declining rates in developed economies tend to encourage capital flows into emerging markets, which creates vulnerabilities as the global GDP slowdown could expand credit spreads and squeeze funding liquidity.
Environmental risks and cybersecurity threats were also part of the top six risks to global credit conditions.
"The challenge from a credit viewpoint is how to manage the asymmetric risks and related costs attached to climate change and regulation," S&P Global Ratings said in a report.
While global economic growth is expected to slow to 3.3% in 2019, it is seen picking up in 2020 and 2021 to 3.6% each, though the balance of risks is on the downside.
The Organisation for Economic Co-operation and Development has forecast global growth at 2.9% in 2019, the weakest since the global financial crisis a decade ago.
The rating agency recently trimmed U.S. GDP growth forecast to 2.3% for 2019 and 1.7% for 2020. Eurozone growth is seen slowing to 1.1% in 2020 from an estimated 1.2% in 2019, on the back of slower external demand.
