Global Credit Outlook 2025
expert view / 17 January, 2025
The global credit outlook for 2025 is generally stable but faces significant risks according to Fitch Ratings’ annual ‘Global Credit Outlook’ report.
The bulk of Fitch’s 2025 sector and asset performance outlooks are neutral, reflecting a broadly stable macroeconomic base case. However, this stable outlook masks a more complex picture characterized by significant potential volatility due to heightened geopolitical risks and the possibility of a global trade war. In particular, policy uncertainties in the US could rapidly alter inflation and interest rate expectations, potentially disrupting the strong capital markets environment seen in 2024.
What to watch
- Trump policy agenda: Key policy areas like tariffs, taxes, regulation, and immigration will be significant for credit.
- US inflation: A combination of higher tariffs, lower taxes, deregulation, and immigration cuts could slow rate cuts and strengthen the dollar.
- US consumer resilience: The ability of US consumers to manage pricing pressures will be vital for the global macro and credit outlook.
- European household spending: The eurozone recovery will hinge on household confidence and consumption, with increasing saving ratios in France and Germany indicating a potentially weaker recovery.
- China stimulus: A shift towards monetary and fiscal stimulus began in 2024, but its effectiveness and future scope remain uncertain.
- Geopolitics: Trade tensions and ongoing conflicts are major tail-risks, but conflict resolution could rapidly improve regional risk assessments.
United States: The US economy will slow but maintain growth above 2%. The US credit environment benefits from resilient economic conditions, falling rates, and a strong labor market. However, there are uncertainties due to the new administration's policies, including higher tariffs and potential fiscal loosening, which could impact inflation and credit markets.
Europe: The region faces a slow recovery with challenges from US tariffs and geopolitical risks. The eurozone's GDP growth is projected at 1.2%, with consumer caution and political uncertainties impacting the economic landscape.
China: Several of China’s large sectors face deteriorating outlooks due to external challenges and domestic issues in the property sector. Fiscal policies are expected to help stabilize the economy but at the cost of higher deficits and debt.
Emerging markets: Growth is mixed, with larger economies like Brazil and China slowing. However, smaller EMs show stronger performance, aided by lower interest rates and easing credit stress in regions like the Middle East.
Corporates: Most sectors have a neutral outlook, supported by stable fundamentals. However, risks include economic and geopolitical uncertainties, with China’s sectors related to housing facing challenges due to the weak housing market.
Financial institutions: The outlook is broadly stable, with improved conditions in certain developed European and emerging Asian banking sectors, driven by macroeconomic stability and easing rate pressures.
Public finance and infrastructure: US state and local governments are expected to experience a more normalized revenue environment in 2025 as the federal fiscal impulse and household consumption growth diminish. Although revenue conditions may weaken, the overall credit conditions remain neutral due to strong financial resilience, with a return to pre-pandemic fiscal conditions.
In China, liquidity improvements from the Ministry of Finance's debt substitution plan support a neutral outlook for local government financing vehicles, despite weak capital expenditure flexibility and a high debt burden.
European local and regional governments benefit from central government support, moderate growth, lower inflation, and reduced borrowing costs
Global infrastructure shows steady demand and normalized revenue growth, although political, geopolitical, and economic uncertainties pose potential risks, with policy shifts notable in North American sectors associated with energy and transportation.
Sovereigns: The global outlook is neutral, but US political changes introduce uncertainties. Policies such as higher tariffs and deregulatory measures could impact global credit conditions, particularly in emerging markets. Developing markets will continue to face fiscal pressures from a range of cyclical and structural drivers. The geopolitical risk environment remains heightened.
Structured finance: Asset performance is mostly neutral globally, although North America faces deteriorating outlooks in CMBS and subprime sectors due to economic pressures and high rates for vulnerable borrowers.
You can view the full ‘Global Credit Outlook 2025 report’ here. The report includes further detailed insights into the global economy and commentary on each of outlooks highlighted above. Please note that a Fitch Ratings account may be necessary to access the document.