The Big Picture
2018 Global Credit Themes

The Big Picture presents research on six themes shaping credit in 2018: Growth, Financial Stability, Political & Geopolitical Risk, Technology & Innovation, Climate Change & Sustainability, and Demographics.

Explore our Credit Themes
Growth
Financial
Stability
Political &
Geopolitical Risk
Technology
& Innovation
Climate Change
& Sustainability
Demographics
launch credit themes video
Highlights
SOVEREIGN AND SUPRANATIONAL
/
22
May
2018
US withdrawal from Iran deal increases geopolitical risk in the Middle East
The reimposition of sanctions on Iran would raise the risk of a more interventionist foreign policy from Iran in the Middle East region, which would likely exacerbate conflict hot spots in Syria, Yemen and Iraq. An increase in tensions would in turn drive up military spending across the region, and capital outflows in the case of Lebanon in particular.
Highlights
Cross-Sector
/
14
May
2018
Uncertainty over future of Libor is broadly credit negative
The proposed retirement of Libor and Euribor would have a range of effects on financial instruments, depending on their terms and the characteristics of replacement benchmarks.
Highlights
Cross-Sector
/
27
February
2018
Global economic growth will hit a high-water mark in 2018
We raised our global growth forecasts for 2018 and 2019, incorporating stronger-than-expected economic data and a likely pickup from additional US fiscal stimulus. Growth will peak in 2018 and moderate slightly in 2019 as gently rising inflation prompts tighter monetary policy.
Growth
Financial Institutions
/
17
May
2018
Slowdown in growth of US household debt is credit positive

A new report from the New York Federal Reserve Bank shows US household debt grew 3.8% in the first quarter from a year earlier, well below the rate of growth posted over the last three quarters of 2017 and only slightly higher than our 2.7% 2018 GDP forecast, a credit positive. The rate of new US household debt delinquencies was 4.54% in Q1, down slightly from a year earlier.

Cross-Sector
/
15
May
2018
Asia’s reliance on exports continues, while China plays growing role in regional trade

Asia continues to depend on merchandise exports to generate economic growth, with its manufacturing-based economies and two trans-shipment hubs -- Singapore and Hong Kong -- most reliant on trade. China has become a much more important source of final demand, especially for consumption goods.

SOVEREIGN AND SUPRANATIONAL
/
14
May
2018
China’s likely refusal of US trade demands is negative for investment, growth in both countries

China cannot reduce its trade surplus with the US to the extent and at the pace sought by the US without significantly disrupting the Chinese economy. The divergence of the two governments’ trade policies is negative for investment and growth in both countries.

Financial Stability
SOVEREIGN AND SUPRANATIONAL
/
25
May
2018
Currency depreciation poses risk to APAC emerging markets with high external funding needs

Weakening currencies in Indonesia and the Philippines will exacerbate already weak debt-affordability metrics, but the credit impact will be most negative for economies with high external financing needs, including Pakistan, Mongolia and Maldives.

Corporates
/
24
May
2018
High corporate leverage signals future credit stress even as the default rate remains low

A prolonged environment of low growth and low interest rates has triggered striking changes in nonfinancial corporate credit quality. The record number of highly leveraged companies has set the stage for a particularly large wave of defaults when the next period of broad economic stress eventually arrives.

Financial Institutions
/
16
May
2018
China regulators make progress on de-risking the financial sector

The growth of China’s shadow banking assets will remain constrained in 2018 under tight regulations.

Political & Geopolitical Risk
Corporates
/
15
May
2018
Proposals to lower US drug prices would be credit negative, if adopted

Proposals from the US Department of Health & Human Services to lower US prescription drug prices, if enacted, would pressure US drug prices, a credit negative for branded and generic drug companies. The credit impact would vary by company, generally depending on the portion of each company’s sales coming from the US market.

Cross-Sector
/
18
April
2018
Russia resilient to new US sanctions

Russia's strong public and external finances will help shield the broader economy from the impact of new US sanctions, protecting the sovereign credit profile. However, the sanctions will be credit negative for some Russian debt issuers, and uncertainty around potential further sanctions persists.

Cross-Sector
/
11
April
2018
Knock-on effects of US tariffs on China’s exports and economy could be wider than direct effect

The direct impact from US tariffs on targeted sectors on China’s exports and GDP growth will be limited, but there are likely to be knock-on effects for other sectors that could greatly increase the total effect.

Technology & Innovation
Cross-Sector
/
17
May
2018
China remains focused on developing its tech sectors despite risk of US restrictions

China has significant financial and policy means to support its large state-owned companies as implementers of its high-tech vision. The Chinese government may increase direct and indirect financial support to technology sectors to mitigate the impact of any US actions on individual companies.

Corporates
/
3
May
2018
Agribusiness will benefit from rising food demand, with the help of new technology

Global population growth and rising incomes will drive increasing demand for food in coming decades. This will require agribusiness to increase agricultural output with the aid of new technologies from autonomous vehicles to biotech and blockchain.

Financial Institutions
/
25
April
2018
Fintech will open a split in global banking leadership, shaping the bank of the future

Incumbent banks that pursue agile digital strategies will defend their core franchises, broaden their customer bases and improve efficiency, supporting their creditworthiness. Laggards will face increased customer attrition, reduced pricing power and uncompetitive cost structures.

Climate Change & Sustainability
Financial institutions
/
24
May
2018
European insurers are increasingly engaged as ESG risks, opportunities come into focus

Many European (re)insurers incorporate Environment, Social and Governance (ESG) issues into their business strategies. We expect their consideration of ESG matters to become increasingly sophisticated and comprehensive, particularly as factors such as population aging and climate change start to affect the sector in more tangible ways.

SOVEREIGN AND SUPRANATIONAL
/
15
May
2018
Small, agriculture-reliant sovereigns most vulnerable to climate change

A common characteristic among sovereigns that are most susceptible to climate change is a reliance on agriculture that is rain-fed rather than irrigated. However, access to multilateral financial support can offset risks to food security.

Demographics
Cross-sector
/
17
May
2018
How demographics will shape labor markets and credit trends

Demographic shifts will induce profound changes in economic growth trajectories and sector priorities.

Sovereigns
/
8
May
2018
Nordic immigration’s growth dividend offsets modest fiscal costs

Immigration to the Nordic countries will continue to have a positive impact on the size of the labor force and productivity, but a lower employment rate for some segments of the immigrant population will entail costs for the public finances.

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