LONDON: Rating agency Moody’s warned on Wednesday that a slowdown in global growth linked to China and a rise in US interest rates are two key reasons why it could lower its credit grades for countries next year.

Though the agency’s overall view is that a “shallow” economic recovery around the world should help shore up the ratings it assigns to countries, it said there’s potential for some downgrades in 2016 and that risks are “tilted to the downside.”

In a wide-ranging report, the agency cautioned that a rate hike by the US Federal Reserve, which would be its first in more than nine years, could hit emerging market countries. Investors have used low interest rates in the US to borrow money to invest in higher-growth, riskier economies around the world.

Moody’s said higher US interest rates will create more uncertainty for countries like Turkey, Tunisia, Venezuela and Argentina, that have in recent years benefited from foreign investment. It does not, however, forecast a crisis in emerging markets.

The agency also warned that a sharp slowdown in China would have “broad implications and negatively affect trading partners and economies that are highly dependent on commodity exports.”

China has been the main locomotive of the world economy over the past few years but its growth is now coming off the boil. Though its economy is still expected to grow about 6-7pc range in the coming year.

Published in Dawn, November 5th, 2015

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