Significant central bank rate cuts, healthy balance sheets, and a global economic growth slowdown of only 0.2 percentage points support a broadly neutral credit outlook for 2025, according to Fitch Ratings.
However, the ongoing economic slowdown in the United States and China, the fragility of the eurozone’s recovery, significant uncertainties surrounding U.S. economic policy, and geopolitical flashpoints pose key credit risks.
The year 2024 was marked by a combination of U.S. economic resilience, a tentative eurozone recovery, strong capital markets, and positive rating trends. Major global credit risks, including those stemming from inflation, geopolitics, and contagion from stressed valuations in key asset classes such as U.S. commercial real estate and Chinese residential real estate, did not materialize. The likelihood of a hard landing has diminished, even as the global economic cycle remains in recession, with both the U.S. and China expected to continue slowing in 2025.
Fitch’s ratings performance reflected a broad normalization of economic and credit conditions since the pandemic. The balance of positive and negative rating outlooks has returned to being nearly even for both investment-grade and below-investment-grade categories.
However, the agency warned of “significant risks and uncertainties.” The incoming Trump administration is expected to materially increase tariffs, raising the risk of a global trade war with negative implications for growth. Other potential U.S. policy priorities, such as tightening immigration restrictions and implementing tax cuts, could add to inflationary pressures. Political uncertainty in the U.S. will have global ramifications, posing a significant potential credit-negative factor for Europe, Asia, and other major U.S. trading partners. Global geopolitics in Europe and Asia remains a key risk.
