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The stability of the global credit environment should see continual improvement in 2022, according to a new report from Moody’s Investors Service.

The rating agency said that steadying economic activity, alongside continued progress on Covid-19 vaccinations, will lead to improved credit quality for debt issuers in the year ahead.

However, the report also forecasted differences in progress between geographic regions and sectors.

“Overall, we expect the global economic recovery to further solidify throughout the year, led by slowing but still solid growth in the U.S. and China,” the report said. “But economic prospects will vary worldwide – starkly, in some cases.”

In particular, the recovery will likely be slower in low-income countries with limited vaccine availability.

“The pandemic’s economic damage is reversing gains that many of these countries had made in reducing poverty, alleviating food insecurity and improving educational opportunities for the most vulnerable,” the report said.

At the corporate level, many lower-rated companies “remain fragile,” the report also noted.

“In particular, the credit environment will become less benign for companies in many emerging market countries as funding conditions gradually turn less supportive,” it said.

Moody’s also said that risks tied to leverage will remain high, and that Covid-19 will remain a public health threat — albeit a diminishing one — over the coming year.

“The virus will remain endemic, and there also remains a downside scenario in which vaccine-resistant variants emerge that prolong the crisis and require new containment measures,” the rating agency said.

Other risks to the recovery include prolonged supply chain disruptions and labour shortages, plus higher-than-expected inflation.