Credit risk

Geopolitical unrest leads to increased credit risk: Moody’s

“Geopolitics can disrupt economic, financial, institutional and political stability and can directly affect credit,” Kelvin Dalrymple, vice president and chief credit officer at Moody’s, said in a statement.

Moody’s said credit risks were rising in several key areas due to increased fragmentation, including trade disruption, security coordination, cross-border financial issues, climate change policy and migration patterns.

For example, persistent supply chain issues are pushing countries “towards greater self-reliance or ‘welcoming friends’ in areas ranging from health to food to energy – which can reduce efficiency, raise prices or limit availability, harming consumption, welfare and growth”. It said.

The ratings agency also expects an increasingly fragmented approach to global security to weigh on finances.

“Many sovereigns are likely to increase defense spending and become more self-sufficient in security. This will increase debt or divert resources from projects that can improve credit in education, infrastructure and social services,” he said. he declared.

Moody’s also said it expects a lack of coordination in efforts to combat global warming between the countries that produce the most greenhouse gas emissions and the countries that suffer the most from the effects of climate change.

“So far, developing countries have received only a small share of the funding promised to them by advanced economies to tackle climate change,” he said.

In addition, countries’ approach to global migration can harm international relations, he noted.

“Hosting refugees directly adds to government spending, increasing fiscal and social risks,” he said. “Countries are also concerned about the treatment of their diasporas, which can increase tensions between home and host countries.”