Credit conditions are looking brighter for the year ahead, underpinned by continued solid economic growth, says Moody’s Investors Service in a new report.
The credit outlook for most sectors in 2018 is increasingly positive, the report from the credit rating agency indicates. Broad, robust global economic growth will benefit most sectors in 2018, it says.
“The improving outlook underscores the strength of the global economy overall,” says Elena Duggar, associate managing director at Moody’s, in a statement. “Global credit conditions in 2018 will be defined by healthy economic growth and a supportive funding environment, which will help to balance against a build-up of longer-term risks.”
The report calls for above trend global gross domestic product growth in 2018 of around 3.2%, which is similar to 2017, and represents an increase from 2.5% growth in 2016. However, unlike recent years, Moody’s expects growth to be more broad-based and sustainable in the year ahead.
“Our outlook is more positive overall than last year,” says Duggar. “While there is still uncertainty over trade policy and political risks, these risks have abated somewhat. Also, importantly, we have a stronger sense of the direction and timing for monetary policy.”
On that front, the report expects central banks will be normalizing their balance sheets in 2018 and 2019.
Factors, such as technology and innovation, climate change, and demographics, will likely increasingly play a bigger role in Moody’s assessment of future credit conditions. “Rapid technological change, for example, will continue to transform production processes, business models, and government regulation, all of which will impact credit fundamentals,” the report says.
“Climate change and demographic trends, such as aging populations, also pose significant medium and longer-term challenges to growth on a global scale,” the report adds. “The ability of governments, industries and market participants to adapt to these changes will determine if their creditworthiness remains resilient.”