Global credit conditions to weaken next year: Moody's

New Delhi: Moody's Ratings said on Tuesday that it expects global credit conditions to weaken in 2027 as higher financing costs and elevated energy prices create pockets of pressure, though major economies will continue to expand.

The US-based credit rating agency said in a report that costlier credit, artificial intelligence (AI)-led transformation, political intervention and security premiums will drive credit risks and opportunities across sectors and regions. "Government intervention through tariffs, regulation, export controls and strategic investment will play a growing role in credit outcomes," it said, adding that these will continue to influence trade, capital allocation and competition in 2027.

According to the report, higher refinancing costs will put greater pressure on highly leveraged issuers and borrowers with significant near-term maturities. "However, banks and life insurers are the exception, as higher rates support their earnings," it said.


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The report further said that rising spending on energy security, critical minerals, defence and climate resilience will create opportunities for some sectors while increasing costs for others. Commenting on investments in AI, the report said AI investment will remain massive, but investors will increasingly focus on whether revenues and productivity gains justify the scale of spending.

"Business model disruption will become more visible with some companies gaining from stronger demand and productivity, while others facing more competition and weaker pricing power," it said. Moody's Ratings said that the expansion of AI infrastructure beyond the US is supporting investment and growth in parts of Asia-Pacific, although benefits will be uneven. "The region is also central to global semiconductor and critical-mineral supply chains, making technology restrictions, export controls and supply-chain security increasingly important credit considerations," it added.