Moody’s has singled out Britain, Hong Kong, Argentina and South Africa as countries that needed continued monitoring. Photo: Bloomberg

JOHANNESBURG – Rating agency Moody’s has singled out Britain, Hong Kong, Argentina and South Africa as countries that needed continued monitoring amid geopolitical developments.

In a report issued on Tuesday, Moody’s pointed to the four countries, charging that the global environment had become less predictable for its 142 sovereign rates, encompassing $63.2 trillion (R940trln) in outstanding debt.

The agency said an increasingly antagonistic political environment was undermining growth, weakening global and national institutions and reducing resilience to shocks.

Moody’s revised its global sovereign outlook to negative from stable for 2020, highlighting that the slowdown in growth had worsened due to increasing populism and trade tensions. It said trade wars and geopolitical risk would weaken open economies by lowering investment and economic activity.

“The antagonistic political environment is also weakening the shock-absorption capacity of sovereigns with high debt levels and low fiscal buffers,” said Jaime Reusche, Moody’s vice-president and co-author of the report. “For some, it is also weighing on institutional strength, with policymakers increasingly constrained.”

Across the G-20, Moody’s estimated that growth fell to 2.6 percent in 2019 from 3 percent in 2018.

Moody’s said unpredictable politics create an unpredictable economic and financial environment, prone to volatility in financial and commodities markets and sharp shifts in sentiment.

It said those economies embedded in global supply chains that rely on trade for growth – such as Hong Kong, Singapore, Ireland, Vietnam, Belgium, the Czech Republic and Malaysia – face the greatest risk of slowing economic activity.

Moody’s said the debt downgrade and a negative global outlook for sovereigns in 2020 came as disruptive political environment exacerbated credit challenges.

Moody’s said around the world, an increasingly populist tone was undermining domestic policy effectiveness, weakening institutional strength and compounding social and governance risks.

Moody’s sovereign risk managing director, Alastair Wilson, said the US-China trade war was one of the main challenges to global economies.

“The starkest manifestation of geopolitical tensions is the US-China trade war,” Wilson said.

“Notwithstanding the latest pause, broader disruption to trade is aggravating long-standing structural bottlenecks and damaging.