Global credit growth to stabilise in 2017, says Fitch

Global credit growth in 2017 is likely to stabilise following a slowdown in 2016, but remains at a record low since the global financial crisis of 2008, Fitch, a financial rating agencysaid in its latest Macro-Prudential Risk Monitor released on Friday

Consequently, macro-prudential risk indicators (MPI scores) continue to point towards reduced vulnerability to systemic stress in the majority of markets.

The rating agency also estimated that global median real credit growth would be 2.5 percent in 2017, in line with 2.8 per cent growth in 2016.

It said, “The stabilisation is driven by credit performance in emerging markets (EMs), particularly the Middle East and Africa (MEA) and Latin America, which accounted for the sharp deceleration in global credit growth from 5.6 per cent in 2015.

“This reflects the recovery in EM demand, underpinned by the progress commodity producers have made following the 2014-2015 terms of trade shock. Subdued credit growth is becoming more widespread.

“Fitch does not expect any markets to have real credit growth over 15 per cent in 2017, with 42 per cent of EMs and 64 per cent of developed markets (DMs) forecast to have low but positive credit growth of up to five per cent.”

It said that the 2016 slowdown was driven by a marked deceleration in median credit growth of 2.9 per cent in EMs, well below average post-global financial crisis growth of 8.4 per cent during 2010-2015.

“For MEA and Latin America, median credit growth slowed to 2.8 per cent and 2.9 per cent respectively, while EM Europe’s weak credit performance continued at 1.3 per cent.

“EM Asia saw the highest credit growth at 9.9 per cent, but this was moderate relative to 2010-2012 performance in the immediate aftermath of the global financial crisis and below double-digits for half the markets in the region.

“Modest credit growth continued in DMs at just above two for the third consecutive year, in line with the economic recovery.

“MPI scores are updated to reflect outturns for 2016 and coverage has been expanded to include the Maldives (MPI 1), the sovereign rating of which has been newly assigned this year,” said Fitch.