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The rise of geopolitical turmoil presents rising risks for global credit, says Moody’s Investors Service in a new report.

The rating agency said increased geopolitical fragmentation, related to events such as Russia’s invasion of Ukraine, and turmoil in global trade amid both a rise in protectionism and supply chain disruptions are intensifying credit risks.

“Geopolitics can disrupt economic, financial, institutional and political stability and can directly affect credit,” said Kelvin Dalrymple, vice-president and senior credit officer with Moody’s, in a release.

Moody’s said credit risks are rising in several key areas as a result of increased fragmentation, including trade disruption, security coordination, cross-border financial issues, climate change policy and migration patterns.

For instance, ongoing supply chain issues are pushing countries “towards greater self-reliance or ‘friend-shoring’ in areas from health to food to energy — which may reduce efficiency, raise prices or limit availability, hurting consumption, welfare and growth,” it said.

The rating agency also expects an increasingly fragmented approach to global security to weigh on finances.

“Several sovereigns will probably increase defence spending and become more self-reliant for security. This will either raise debt or divert resources from potentially credit-enhancing projects in education, infrastructure and social care,” it said.

Moody’s also indicated it expects a lack of coordination in efforts to combat global warming between the countries that produce the most greenhouse gas emissions and the countries that suffer most from the effects of climate change.

“So far, developing countries have received little of the financing promised to them by advanced economies to address climate change,” it said.

Additionally, countries’ approach to global migration can harm international relations, it noted.

“Hosting refugees adds directly to government spending, increasing fiscal and social risks,” it said. “Countries also care about the treatment of their diasporas, which can increase tensions between home and host countries.”