LONDON, May 18, 2022
/PRNewswire/ -- Deteriorating global macroeconomic conditions,
combined with heightened geopolitical uncertainty and lingering
COVID-19 lockdowns in China, fuel
persistently high inflation, market volatility, and rising yields,
and pose an increasingly challenging outlook for credit, S&P
Global Ratings said today in a report "Global Credit Conditions
Special Update: Inflation, War, And COVID Drag On."
"For now, credit ratings are showing resilience as they benefit
from still largely growing economies, consumption supported by
household savings, and record corporate cash balances," said
Alexandra Dimitrijevic, S&P
Global Ratings Global Head of Analytical Research and Development.
"Rating actions globally in April and May were balanced, outside of
countries directly impacted by the conflict, and the net outlook
bias, which speaks to forward-looking rating trends, remains close
to neutral. The distress ratio for U.S. speculative-grade
borrowers, an indicator of future default trends, is increasing but
remains well below the five-year average."
"Credit ratings could come under more pressure if the situation
persists for more than one or two quarters, or deteriorates
further, as households struggle with falling real incomes and
rising energy and food prices, businesses face weaker demand
conditions and margin erosion, and financing conditions ratchet
tighter. Defaults could start picking up toward the end of the year
as we get into 2023."
Our interim credit conditions update follows S&P Global
economists' downward revisions to global macroeconomic base-case
forecasts, reflecting that key forecast assumptions are likely to
play out over a longer period and be more damaging than we
previously expected. The conflict between Russia and Ukraine and growing tensions with NATO are
more protracted than expected. Inflation remains stubbornly high,
fueled by food and rising commodity prices. The Chinese authorities
are continuing to lock down major cities and regions to stem
COVID-19. And the U.S. Federal Reserve and other major central
banks are ramping up their fight to rein in inflation
pressures.
From a credit perspective, this represents a wind shift as
credit prospects become more challenging. While widespread concerns
relating to recessionary scenarios in advanced economies have not
been realized so far, they are a growing downside risk for later in
the year and into 2023, particularly if the war in Ukraine drags on and escalates, or the
authorities struggle to contain the pandemic in China. The Fed is also treading a fine line in
reining back inflation without destabilizing financial markets,
undermining confidence, or triggering a hard landing for the
economy.
This report does not constitute a rating action.
Media Contacts:
Michelle James, London +44
(0)7971 123 692
michelle.james@spglobal.com
S&P Global Ratings is the world's leading provider of
independent credit ratings. Our ratings are essential to driving
growth, providing transparency and helping educate market
participants so they can make decisions with confidence. We have
more than 1 million credit ratings outstanding on government,
corporate, financial sector and structured finance entities and
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unique combination of broad perspective and local insight. We
provide our opinions and research about relative credit risk;
market participants gain independent information to help support
the growth of transparent, liquid debt markets worldwide.
S&P Global Ratings is a division of S&P Global (NYSE:
SPGI), which provides essential intelligence for individuals,
companies and governments to make decisions with confidence. For
more information, visit www.spglobal.com/ratings.
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SOURCE S&P Global