International rating agency Moody's Investors Service stated that global sovereign ratings for the following 12-18 months stay negative. The agency’s negative outlook was mainly due to continued low economic growth rates, fiscal problems, and rising political and geopolitical risks.
Moreover, the general assessment of the situation is based on the ratings of separate states. Thus, for example, 26% of 134 sovereign ratings are negative, in comparison with 17% last year. This is the largest proportion since the 2012 eurozone debt crisis.
The number of countries with a stable outlook dropped to 65% from 75% last year. The share of states with positive outlook rose to 9% from 8% last year.
Moody's analysts noted that a shift towards fiscal stimulus, such as higher public expenditures funded by a low cost of capital, can support economic growth only in the short term. For a long-term effect, it is necessary to make sure that these measures will provide higher labour productivity.
However, the situation is aggravated by the fact that many countries show political inertness and seem to put aside all recent achievements, including international trade agreements.
For example, according to Moody's, Europe is affected by a lack of unity and risks associated with a possible collapse of the European Union after Brexit.
