Mumbai: Increasingly unfriendly global political environment with tensions between the US and China over trade, India and Pakistan over Kashmir, EU and the UK over Brexit are “growth-diminishing”, Moody’s said on Monday.
The antagonistic political environment is weakening global and national institutions, lowering the shock-absorption capacity of sovereigns with high debt burdens and low fiscal buffers, it said.
“While the starkest example is clearly the trade war between the US and China, distracting and, in some cases, growth-diminishing tensions have also risen in the Gulf, between Japan (A1 stable) and Korea (Aa2 stable), India and Pakistan (B3 negative), the US and the EU, and the EU and the UK,” the ratings agency said.
The slowdown, Moody’s said, partly reflects cyclical factors, partly structural drivers, including demographic trends. But the adverse impact of the increasingly antagonistic global political environment, particularly on global trade and investment, has been pervasive and will likely remain so.
“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 said.
