Global ratings major Moody’s Investors Service lowered its global sovereign outlook for 2020 to ‘negative’ from ‘stable’, it says in a report released Monday (Nov 11), as the disruptive and unpredictable domestic and geopolitical environment is exacerbating the gradual slowdown in trend GDP growth.

Overall, the global environment is becoming less predictable for the 142 sovereigns Moody’s rates, encompassing US$63.2 trillion in debt outstanding.

The antagonistic political environment is also weakening the shock-absorption capacity of sovereigns with high debt levels and low fiscal buffers. For some, it is also weighing on institutional strength, with policymakers increasingly constrained.

While the starkest example remains the US-China trade spat, tensions that diminish growth have also risen in the Gulf, between Japan and Korea, India and Pakistan, the US and the Europa, and the Europa and Britain.

The first-order effect of these strains – for example, the impact of tariff increases on trade volumes – is not always severe, but the knock-on impact on investment and capital flows is likely to damage both near- and medium-term growth prospects across all regions.