USISPF Briefing on Emerging Markets Credit Outlook by Moody’s

On May 12, Rahul Ghosh, Senior Vice President of Global Emerging Markets, Credit Strategy & Research, at Moody’s, joined USISPF members on a webinar to share high-level views on the credit outlook of emerging markets.

Overall, Mr. Ghosh highlighted that the pandemic’s economic and financial fallout will heighten credit risks for emerging market issuers. While external and fiscal buffers vary across regions, low-rated sovereigns with large external repayments are most vulnerable to prolonged stress. Additionally, the fallout from the pandemic will increase the corporate default rate in emerging markets over the coming year. Finally, he noted that future challenges, as the world recovers from COVID-19, include lower rates and higher government debt, changing consumer habits, climate risks, protectionism, tech disruption, and income inequality.

His presentation focused on emerging markets more broadly, but during the Q&A session with USISPF members, Mr. Ghosh evaluated India’s ongoing fiscal response to the economic impact of COVID-19, including the RBI’s measures to increase liquidity, as well as some proposed or hypothetical steps the Government of India could take in the future. He also provided his insight on the impact the current global economic challenges could have on India’s banking and non-banking financial company (NBFC) sectors.

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