London: Fitch Ratings has revised the 2025 global sovereigns outlook to ‘deteriorating’ from ‘neutral’ reflecting the increase in trade tariffs and policy uncertainty, which will weaken the global growth outlook and heighten the risk of more testing financing conditions. Public finance and political risks remain high.
The escalation in the global trade war, uncertainty over the endpoint for tariffs and their impact on global trade volumes, supply chains, investment and international relations is a significant adverse global economic shock. Uncertainty over the extent and timing of the effects on prices and activity add to uncertainty over the path of US Federal Reserve policy rates and the risk of volatility in financing conditions.
A fall in Brent crude oil prices to USD65 a barrel in 2025 from USD79.5 a barrel in 2024 will increase economic and fiscal pressures on major exporters. Cuts to US international aid add to risks facing some emerging markets. In contrast, a depreciation of the US dollar eases the burden on emerging markets with US dollar-denominated debt and gives some emerging-market central banks scope to cut interest rates faster.
Public finances will remain under pressure in 2025 from rising defence spending, interest costs, demographic trends, weak growth and social pressures, particularly in developed markets. We expect median government debt/GDP to increase slightly to 54.5% at end-2025 from 54.1% at end-2024. Geopolitical risks remain high given the wars in Ukraine and the Middle East, US-China strategic rivalry, trade tensions, social discontent, and the flux in US foreign policy.
Rating Outlooks are close to balance in mid-2025, with 13 on Positive Outlook, only slightly more than the 10 on Negative Outlook. Downgrades since 2020 have created headroom in some ratings to withstand a worsening in credit conditions. Policy responses will support ratings in some cases.
‘Global Sovereigns Mid-Year Outlook 2025’ is available at www.fitchratings.com or via the link above.
Contact:
Media Relations: Peter Fitzpatrick, London, Email: [email protected]
Eleis Brennan, New York, Email: [email protected]
Peter Hoflich, Singapore, Email: [email protected]
Additional information is available on www.fitchratings.com
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