Global financial conditions are getting worse as borrowing rates rise and economic growth slows: Moody's

30 Jun 2022 , 02:59 PM

According to Moody’s Investors Service, the extended war between Russia and Ukraine increased borrowing rates, and weaker economic development has all contributed to a worsening of global financial conditions.

It claimed that the rise in oil and food prices brought on by the situation in Ukraine is eroding consumer buying power, driving up business input costs, and lowering investor confidence.

With rising borrowing costs and economies that have not yet fully recovered from the COVID-19 pandemic crisis, many frontier market sovereigns would find it difficult to service their debt, the report stated.

According to a report by Moody’s, “global credit conditions have turned more negative and will be tighter for the rest of the year amid rising borrowing costs, the potential for a protracted military conflict between Russia and Ukraine, materially slower global economic growth, surging energy and commodity prices, a new supply-chain disruption, and increased financial market volatility.”

Financial market conditions are tightening synchronously across continents as central banks in numerous nations begin to boost interest rates in reaction to excessive inflation. The US-based rating service predicted that “financial conditions would continue to tighten as interest rates rise.”

Compared to its March predictions of 3.6% and 3%, respectively, Moody’s reduced its economic growth forecast for the G-20 nations to 3.1% for this year and 2.9% for next year. In order to avoid a further rise in inflation expectations, central banks in both developed and developing market nations will keep raising interest rates, according to Moody’s.