(Photo : Pixabay)
Representational Image
The overall mood in credit conditions globally remains optimistic with a healthy dose of caution as the third quarter of the year winds down, according to an analysis.
In its latest report, credit rating agency S&P Global noted that this upbeat is driven by a decrease in recession odds, slowing inflation, and the decision of several central banks to reduce interest rates.
The US-based firm, however, warned that challenges still remain on the horizon, including softer economic growth, a possibly prolonged period of high rates, geopolitical risks, rising trade protectionism and persistent pressure on real estate markets.
Promising Credit Conditions in the US
According to the report, credit conditions look promising globally, with some divergence across regions in achieving credit recovery in 2025.
S&P Global highlighted that the credit outlook is seemingly brighter in North America, and a possible credit upturn is expected for next year.
"Borrowers in North America could enjoy more favorable credit conditions if the US economy settles into a soft landing and the Federal Reserve begins to ease monetary policy," said the credit rating agency.
It added: "The US economy has seen relatively strong growth, but credit deterioration could persist if interest rates remain higher for longer. Other headwinds for US credit market recovery are lingering cost pressures that weigh on borrowers' liquidity, declining commercial real estate valuations and the risk of market volatility returning as the November presidential election nears."
Global Outlook
According to S&P Global, Europe is keeping calm and carrying on as uncertainties remain.
The agency added that the region's economy has eased into a soft landing, and eurozone rates are projected to return to neutral by the third quarter of 2025.
"The European economic and credit environment continues to strengthen gradually, despite significant political and geopolitical uncertainty clouding the outlook," said S&P Global.
The report also added that credit conditions in the Asia-Pacific region is stable, and it will see strong recovery in 2025.
"Credit conditions across emerging markets continue improving amid resilient economic activity, supported by solid domestic demand, and improving global trade and financing conditions," S&P Global concluded.
