HYDERABAD: Trade tensions and disruptive politics will slow growth worldwide and trigger financial shocks, rating agency Moody’s said on Monday, as it cut its global sovereign outlook for 2020 from ‘stable’ to ‘negative’.
Increasingly unfriendly global political environment with rising tensions between the US and China, Japan and Korea, India and Pakistan, the US and the EU and the EU and the UK over Brexit is ‘growth diminishing’, said Moody’s, which recently downgraded outlook on India’s economic growth.
“While recovery from weak or negative growth in a number of EMs (emerging markets) will sustain that level overall in 2020, global growth will remain below trend and any recovery will be shallow and fragile,” it said.
According to Moody’s, the slowdown partly reflects cyclical factors and partly structural drivers, including demographic trends.
However, the adverse impact of global political environment, particularly on global trade and investment, has been pervasive and will likely remain so, it said.
“Overall, the global environment is becoming less predictable for the 142 sovereigns that we rate, encompassing $63.2 trillion in debt outstanding. Event risk is rising, raising the spectre of reversals in capital flows that would crystallise vulnerabilities facing the weakest sovereigns,” it explained.
While in Europe and Central Asia, the negative outlook change for the UK was driven by the continued decline in institutional strength resulting from the ongoing uncertainty surrounding the UK’s exit from the EU, in Asia-Pacific, the outlook on Hong Kong was changed to negative reflecting the rising risk that ongoing protests are eroding government and policy effectiveness and damaging the territory’s attractiveness as a trade and financial hub.
Main drivers
Among the main reasons behind the move were unpredictable politics and trade wars such as that between the US and China that would weaken open and commodity-exporting economies.