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Income inequality can exacerbate broader sovereign credit challenges
June 19th 2019 (5.13mins)
Mauro Leos, Gabriel Torres
In this edition of Moody’s Talks, Associate Managing Director Mauro Leos and Vice President Gabriel Torres of the Sovereign Risk Group discuss the credit implications of long-standing and in some cases rising income inequality. While income inequality is not a differentiating factor of ratings across all sovereigns, for some, rising income inequality exacerbates broader credit challenges stemming from wide-ranging social tensions and political risk, weakening growth and weak or weakening institutions.​​​​​​
Income inequality associated with some credit drivers, but not a differentiating rating factor
​​High or rising income inequality can be linked to increased political turmoil, lower economic growth and greater fiscal spending pressures. . However, rather than influencing sovereign ratings across the board and at all times, for some sovereigns rising income inequality exacerbates broader credit challenges stemming from wide-ranging social tensions and political risk, weakening growth and weak or weakening institutions​
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