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19/11/2019 18:01

Global economy remains fragile in 2020 - Moody's

    Global credit conditions in 2020 will weaken as a result of growing risks of an economic downturn, trade policy uncertainty and the effects of an unpredictable political and geopolitical environment, said Moody's Investors Service in a new report.
  The global economy will remain fragile in 2020 after recording the lowest global growth in 2019 since the 2009 recession.
  "Overall global growth will remain lackluster amid a deceleration in the US and China, the main engines of the world's economic activity," said Moody's Associate Managing Director Elena Duggar.
  "Growth in advanced economies will slow toward potential as labor markets continue to tighten, while growth in many emerging market countries will be below average as a result of China's slowdown and as global trade growth grinds to a halt," she added.
  Global trade tensions and continued protectionist actions will remain a key risk to credit conditions in 2020, testing the strength of consumer confidence in an environment of high political and geopolitical uncertainty. Risks will center around US-China trade disputes, Brexit-related uncertainty and the escalation of other bilateral disputes.
  At the sector level, spillover effects from trade frictions will drive shifts in global supply chains and weigh on investment decisions. Furthermore, sporadic episodes of heightened financial market volatility will flare up as long as trade uncertainty lingers.
  Although Moody's does not expect a recession in 2020, recession risks are building amid a backdrop of trade policy uncertainty, an unpredictable political and geopolitical environment, and as fiscal and monetary policy space in advanced economies remains limited to prevent a future downturn.
  Other risks to the global economy relate to high leverage and the historically high number of debt issuers with weak credit quality accessing the credit markets. Recession risks will remain elevated in Europe and the US, while in China domestic rebalancing will continue to create challenges in maintaining the country's rapid growth.
  Moody's expects interest rates to remain low and yield curves to remain flat for several years going forward, with mixed credit effects by sector. Low rates will keep borrowing costs attractive for sovereigns and companies but will create a difficult operating environment for banks and insurers. Moreover, low rates will also continue to encourage risk-taking as investors reach for yield.

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