KUALA LUMPUR (June 30): Moody’s Investors Service said global credit conditions had turned more negative and will be tighter for the rest of the year amid rising borrowing costs, the prospect of a protracted military conflict between Russia and Ukraine, materially slower growth of the world economy, surging prices of energy and commodities, renewed supply-chain disruption and increased financial market volatility.
In a report titled “Credit Conditions — Global: 2022 Outlook Update — Rising borrowing costs, slower growth pinch credit conditions” released on Thursday (June 30), the firm said that still, credit fundamentals remain generally healthy for higher-rated debt issuers as credit metrics recovered in 2021 and as liquidity remains strong overall.
However, it said for speculative-grade issuers with low free cash flow and a high portion of floating-rate debt, debt affordability, liquidity and refinancing risks are rising.
Moody's credit strategy managing director Elena H Duggar said the surge in energy and food costs spurred by the invasion of Ukraine is weakening the purchasing power of households, raising input costs for companies and dampening investor sentiment.
“Among sovereign debt issuers, debt sustainability will be especially challenging for many frontier market sovereigns as their borrowing costs climb while their economies still have not fully recovered from the [Covid-19] pandemic crisis,” she said.