Moody's: Protracted Fall In Oil, China Slowdown Mean Weaker Global Growth, Not Recession

KUALA LUMPUR, March 8 (Bernama) -- The protracted decline in oil prices and weaker growth in China have prompted a reappraisal of global economic growth prospects, causing risk aversion to rise and financial market conditions to tighten, says Moody's Investors Service. In a statement Tuesday, the rating agency said while the current environment will curb growth in specific regions, it did not presage a global recession. Moody's said it has taken negative rating actions for a large number of corporates, banks and sovereigns whose revenues, loan portfolio performance and tax receipts were heavily dependent on the production of oil and other commodities. "Our rating actions have been focused on those issuers directly exposed to the prices of oil and commodities because at present we believe that the positive impact of lower commodity prices on global growth helps mitigate the negative effects from the financial markets turbulence," it said. However, market volatility has recently spread beyond the energy and commodity sectors, leading to a broad decline in global equity prices and a surge in high-yield corporate bond spreads, it said. "As a result, financial market conditions have worsened significantly -- a development the rating agency is closely monitoring," Moody's said. The rating agency still expected growth in Group of 20 advanced countries to be broadly stable at 1.8 per cent for 2016 and two per cent for 2017. Moody's said the positive effects of lower commodity prices, to a large extent, will mitigate negative factors, such as weaker consumer and business confidence levels caused by increased financial market volatility and deteriorating trade linkages with emerging markets. --BERNAMA