Mubasher: Moody’s downgraded its 2020 outlook for global sovereign creditworthiness to “negative” from “stable,” citing “disruptive and unpredictable” political environment.

Having already issued downgrade warnings on the UK, South Africa, India, Mexico, Turkey and Hong Kong, Moody's pointed in its report to three main factors behind the world’s sovereign outlook downgrade.

For instance, trade conflicts such as that between the US and China would weigh on open and commodity-producing economies.

Political and geopolitical unrest is amplifying a gradual slowdown in trend gross domestic product (GDP) growth, exacerbating structural bottlenecks and heightening the risks of economic or financial shocks, the ratings agency said.

“The antagonistic political environment is also weakening global and national institutions, lowering the shock-absorption capacity of sovereigns with high debt burdens and low fiscal buffers,” Moody’s said.

“Overall, the global environment is becoming less predictable for the 142 sovereigns we rate, encompassing $63.2 trillion in debt outstanding,” the agency’s report added.

As event risk is on the rise, risks of capital flow reversals mounted, with vulnerabilities facing the weakest sovereigns crystallised.