An increasingly antagonistic global political environment is exacerbating the gradual growth slowdown, weakening institutional strength and raising the risk of economic or financial shocks. Rising event risk renders the global environment less predictable for the 142 sovereigns we rate, and raises the possibility of reversals in capital flows that would hit the weakest sovereigns hardest. Watch the video.

The UK government’s institutional strength has weakened, as illustrated by the increasing inertia and, at times, paralysis that has characterised Brexit-era policymaking. The UK’s debt burden is high and unlikely to fall, given growing pressures for spending increases, with little clarity on how they might be financed. Brexit-related uncertainty has led to slower growth in business investment, which weighs on growth rates.

Our 2020 leveraged finance outlook for EMEA non-financial corporates is that demand for high-yield bonds and leveraged loans will continue to exceed supply. However, a deterioration in credit quality combined with weak documentation will increasingly lead investors to favour companies and sectors they think will be safe through an economic slowdown.