Moody's has negative outlook for sovereigns


  • Economy
  • Monday, 11 Nov 2019

KUALA LUMPUR: Moody's Investors Service has a negative outlook for sovereign creditworthiness in 2020 due to worrying geopolitical environment, rising risks of shocks.

The rating agency said on Monday this reflected its expectations for the fundamental conditions that will drive sovereign credit over the next 12-18 months.

“A disruptive and unpredictable domestic political and geopolitical environment is exacerbating the gradual slowdown in trend GDP growth, aggravating longstanding structural bottlenecks and increasing the risk of economic or financial shocks.

“The starkest manifestation of the impact of geopolitical tensions is the disruption to trade, mainly resulting from the standoff between the US (Aaa stable) and China (A1 stable).

“The antagonistic political environment is also weakening global and national institutions, lowering the shock-absorption capacity of sovereigns with high debt burdens and low fiscal buffers, ” it said.

Moody's said overall, the global environment was becoming less predictable for the 142 sovereigns it rate, encompassing US$63.2 trillion in debt outstanding.

It warned that event risk was rising, raising the spectre of reversals in capital flows that would crystallise vulnerabilities facing the weakest sovereigns.

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