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Key themes shaping global credit markets

Find out how political risks, ESG and other themes will affect market segments including banking, corporates and insurance.
2020 CREDIT THEMES
Access Moody’s industry-leading analysis across topics such as recession risks, trade tensions and disruptive technologies.
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Risks to credit conditions rise as the global slowdown takes hold

Credit Conditions – Global Coronavirus and oil price shocks: managing ratings in turbulent times

17 MARCH
2020
Given sharply lower global growth expectations and acute market volatility, we have taken some rating actions already in the most affected sectors and expect to take more in the coming weeks. These actions reflect the breadth and severity of the shock, and the broad deterioration in credit quality that it has triggered.

Six Themes Shaping Global Credit in 2020

Coronavirus will have a profound impact on credit conditions

Recession Risks
Lower-for-longer Interest Rates
Political Risks
Trade Tensions
Disruptive Technologies
ESG Impact
Recession Risks
The coronavirus will cause unprecedented shock to the global economy
  • The G-20 economies will experience an unprecedented shock in the first half of this year and will contract in 2020 as a whole, before growth picks up in 2021
  • The widening coronavirus outbreak, the deteriorating global economic outlook and asset price declines will create a severe and extensive credit shock across many sectors, regions and markets
  • Oil prices will remain low and volatile, and will contribute to credit stress for oil producers and exporters
Lower-for-longer Interest Rates
Global central banks are stepping up to avert permanent damage to households and businesses
  • Interest rates will remain near zero as global central banks maintain supportive monetary and liquidity policies
  • Coronavirus crisis-response programs will mitigate risks to financial institutions in the short term but could weaken asset quality in the future
  • Issuers with weak liquidity are vulnerable to sudden stops of capital. Many emerging market sovereigns will face significant rollover risk
Political Risks
Governments are reacting quickly to try to contain the damage from the coronavirus, but the pandemic will test the multilateral system
  • Fiscal and monetary authorities will step up the level of support to the economy to avert permanent damage to households and businesses resulting from the coronavirus
  • The pandemic will test the ability and institutional capacity of some governments to respond and coordinate across local, state and national authorities
  • The crisis puts a spotlight on the global multilateral system’s ability to manage fast-moving, complex and interlinked issues across health, transportation, education and business
Trade Tensions
Significant supply chain disruptions will weigh on global trade, on top of existing trade disputes
  • Significant supply chain disruptions spurred by the coronavirus outbreak and weak external demand will weigh on global trade
  • Coronavirus effects and trade tensions will result in further shifts in investment and supply chains, and will challenge the low-inventory business models of trade-reliant economies and companies
  • Bilateral and multilateral trade negotiations will remain ongoing across the globe
Disruptive Technologies
Stay-at-home orders are having a profound impact on the telecom and consumer technology industries, which will transform how we work
  • Adoption of remote telecommunication in the workplace will accelerate, together with deeper e-commerce penetration in traditionally brick-and-mortar industries, such as food retail
  • Growing demand for remote interactions is highlighting the importance of 5G technology, potentially accelerating adoption in the long term
  • A global race for a coronavirus vaccine is underway
  • Corporate management and policymakers will intensify their focus on cyber risk
ESG Impact
As a social risk, the coronavirus will have substantial credit implications for public health and safety
  • As a social risk, the coronavirus outbreak will have substantial credit implications for public health and safety and will further drive the debate about income inequality
  • Investors will seek enhanced disclosure from companies about environmental exposures and risk mitigation
  • Deeper market integration of climate risks will constrain the availability of capital for the most-exposed sectors
  • Natural capital concerns, such as water scarcity, deforestation and food insecurity, will put the spotlight on efficient resource management

Featured Research

Recession risks
Lower-for-longer interest rates
Political risks
Trade tensions
Disruptive technologies
ESG impact
Research Highlight
Cross-sector
/
22
September
2020
From synchronized downturn to uneven recovery: credit risks in turbulent times
Overall credit effects of COVID-19 have been most acute for lower-quality debt issuers in consumer-sensitive sectors and for those with weak liquidity. Recovery over the next year will likely vary.
Research Highlight
Corporates
/
10
September
2020
Corporate reputational risks rise as cyberattacks are more publicized
Awareness of cyberattacks is increasing reputational risks for companies globally as cybercriminals publicly identify their attack targets and disclosure requirements around cyber events become more stringent.
Research Highlight
Cross-sector
/
19
August
2020
Macroeconomics - Global: Coronavirus and the Economy: Alternative Data Monitor
Risks to the economic recovery globally are rising amid a resurgence of coronavirus infections.
22
Sep
2020
/
Cross-sector
From synchronized downturn to uneven recovery: credit risks in turbulent times
Overall credit effects of COVID-19 have been most acute for lower-quality debt issuers in consumer-sensitive sectors and for those with weak liquidity. Recovery over the next year will likely vary.
21
Sep
2020
/
Coronavirus and the Economy: Alternative Data Monitor
Diverging health outcomes and responses to the pandemic are driving an uneven recovery across countries, highlighting the difficulties and trade-offs in reopening economies amid health worries.
24
Sep
2020
/
US Public Finance
Public Finance – US: Low interest rates create pension and investment challenges but lower debt costs
Interest rates will remain low well after the coronavirus crisis subsides, presenting US public finance issuers with a mix of pension challenges and low-cost debt opportunities.
23
Sep
2020
/
Cross-sector
Low interest rates in Latin America will have wide-ranging credit effects
The benefits of low interest rates for corporate borrowers and infrastructure project debt issuers will depend largely on their exposure to local-currency debt. Low rates will challenge bank margins.
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19
Aug
2020
/
Sovereign & Supranational
Normalisation of UAE-Israel ties supports UAE’s tourism sector, improves Israel’s security
The normalisation of diplomatic relations offers important economic benefits for both countries. However, the deal will aggravate the UAE’ already high tensions with Iran, and Israel will continue to face the risk of tensions with the Palestinians.
10
Jul
2020
/
Sovereign & Supranational
Podcast: Cyber election interference poses growing risk to sovereign credit
Leroy Terrelonge of the Cyber Risk group and Bill Foster of the Sovereign team discuss the rising cybersecurity risks related to elections, as voting and vote tallying become more digitized in many countries.​​
24
Aug
2020
/
Supply chain shifts and reshoring will have mixed effects on ASEAN region
Some member states of the Association of Southeast Asian Nations (ASEAN) will benefit as countries reconfigure trade relationships after the COVID-19 crisis.
17
Aug
2020
/
Global trade shows signs of recovery as manufacturing activity strengthens
Global trade is gradually improving across most countries after weakness in April and May. But a widespread resurgence of coronavirus infections would pose new risks to the recovery and further delay trade negotiations on various fronts.
10
Sep
2020
/
Corporates
Corporate reputational risks rise as cyberattacks are more publicized
Awareness of cyberattacks is increasing reputational risks for companies globally as cybercriminals publicly identify their attack targets and disclosure requirements around cyber events become more stringent.
12
Aug
2020
/
Financial Institutions
Podcast: Pandemic amps up banks’ cyber risk, jolts money fund markets
Alessandro Roccati from the banking team explains how coronavirus-driven demand for contactless digital financial services, along with remote work, are raising the cyber threat to banks.
17
Sep
2020
/
Sovereign & Supranational
Government of China: Current flooding poses limited overall risk to economic recovery, sovereign credit quality
Rains have been more intense than usual for the time of year, and have caused more damage than on average, partly offset by the authorities' focus on impact mitigation.
17
Sep
2020
/
US Public Finance
State and Local Government – US: Sea level rise increases credit risk for coastal states and local governments
Rising sea levels leading to more frequent and severe flooding from high tides and storm surges from weather events threaten coastal economies, property values and critical infrastructure.
24
Sep
2020
/
US Public Finance
Public Finance – US: Low interest rates create pension and investment challenges but lower debt costs
Interest rates will remain low well after the coronavirus crisis subsides, presenting US public finance issuers with a mix of pension challenges and low-cost debt opportunities.
17
Sep
2020
/
US Public Finance
State and Local Government – US: Sea level rise increases credit risk for coastal states and local governments
Rising sea levels leading to more frequent and severe flooding from high tides and storm surges from weather events threaten coastal economies, property values and critical infrastructure.
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