The outlook for sovereign creditworthiness in 2019 is stable, balancing the global economy’s continued but slowing growth momentum against rising uncertainty over longer-term economic and financial stability, Moody’s Investors Service says in a report published Tuesday.
The New York-based credit rating agency expects economic growth in the G20 to peak at 3.3% in 2018, slowing to 2.9% in 2019.
For the advanced G20 economies, growth will fall to 1.9% in 2019 from 2.3% in 2018, Moody’s says, and for G20 emerging markets growth will slow to 4.6% in 2019 from 5% in 2018.
The slowing of growth means that the window for countries to address longstanding issues, such as high levels of public and private debt, is closing, Moody’s says.
About three quarters of the 138 sovereigns that Moody’s rates currently have a stable outlook, 15 have a positive outlook, and 19 are negative, down from 22 at this point one year ago.
“Our stable outlook for sovereign ratings in 2019 balances the benefits of continued global growth against emerging domestic and geopolitical risks,” says Alastair Wilson, managing director, global sovereign risk, at Moody’s, in a statement. “Despite the stable outlook overall, we are more mindful than in previous years of the potential for unforeseen shocks to disrupt economic and financial stability over the next 12-18 months.”
The threat of disruptive domestic or geopolitical events poses the greatest tail risk to Moody’s outlook. “Geopolitical risk is a broad category that encompasses U.S. trade and foreign policy which poses an increasingly far-reaching threat to global confidence and growth; conflict on the Korean peninsula; regional conflict in the Middle East; and ostensibly domestic political events, including Brexit and recent events in Italy,” Moody’s says in a news release.