The outlook for the global credit environment has continued to deteriorate over recent months, Fitch Ratings says in a new report. Intensifying inflationary pressures and the resulting monetary policy response have added to increasingly challenging conditions for global growth including from broad-based financial tightening. In addition, recession risks in Europe and the U.S. are high while further growth setbacks could come in China should there be surges in new Covid-19 variants.
We have updated our Key Risks – the risks we have identified as having the most potential impact on our rated portfolio over the coming two years – in our latest Risk Headquarters report to reflect this deterioration. We have added in references to increasing recession probabilities, emerging market vulnerabilities, the potential effects of more widespread asset price corrections, and inflationary effects on consumer demand.
A full or severe stop in gas flows from Russia to Europe is among the biggest potential near-term risks with the prospects of a eurozone recession high so long as the war continues. More broadly, sector vulnerabilities and exposures to weakening growth and tighter financing conditions have begun to show.
The recent mid-year update to our global sector outlooks highlighted deteriorating operating conditions for a number of sectors, especially in emerging markets and for certain sectors with higher exposures to rising rates and real earnings effects from high inflation. Fitch has also conducted analyses on relativevulnerabilities in global mortgage and housing markets to rising rates.
For additional information and links to our most relevant reports on Fitch’s key credit risks, please see our latest Risk Headquarters report available through the link above.
Source: Fitch Ratings
