Moody's expects sovereign credit ratings to stabilize next year as world growth slowly picks up, although uncertainty about U.S. interest rate rises tops a list of four global risks.
Moody's said its global sovereign credit outlook was "broadly stable" for the first time in several years during which debt problems blighting Europe and a commodity boom that lifted producer economies brought a sharp divergence in trends.
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Nearly 80 percent of Moody's sovereign ratings now carry stable outlooks, up from 70 percent at the start of the year, meaning the rating agency does not expect to change them in the medium-term. Thirteen percent have negative outlooks, down from 22 percent in January, while roughly 7 percent of sovereign ratings carry a positive outlook.
"Our global sovereign outlook for 2015 is broadly stable -- a change from the diverse global trends seen in recent years," Moody's said. "We expect that the gradual global recovery will continue."
With the euro zone crisis diminishing and lower growth in Latin America likely as commodity markets cool, "the most recent cycle of credit and rating changes is coming to an end ... leaving a more stable credit architecture in its wake."
Moody's cited four main risks that could derail its view, topped by the possibility that an expected rise in U.S. interest rates will rattle financial markets.
A slowdown in economic growth in China and a muted recovery in the euro area were next, while tensions between Russia and the West over Ukraine and conflict in the Middle East also made the list, alongside general reform fatigue.
"The first two pose the greater short-term threat to sovereign creditworthiness, although the impact of each would be different in nature," the report said.
"Disorderly (U.S. interest rate) normalization would impact sovereign credit risk almost immediately through a shock to asset prices and capital flows" although some degree of volatility was already factored into ratings.
Moody's view on emerging markets was slightly more negative than in recent years, saying elevated household debt in Malaysia and Thailand could make them vulnerable to bad loans should interest rates rise. Indonesia and India could meanwhile be exposed by their current account deficits.
"We have previously noted that we see little prospect of an 'emerging market' crisis developing. However, among both emerging and advanced economies, there are sovereigns that have a higher-than-average exposure to reversals in sentiment," Moody's said. (Reporting by Marc Jones; Editing by Catherine Evans)