International credit rating agency Fitch Ratings has revised its sector outlook downward for this year, highlighting increased risks to the global economy stemming from the US-Israel-Iran conflict.
The agency downgraded the global economic sector outlook from "neutral" to "deteriorating," emphasizing the conflict's impact on growth, inflation, and geopolitical risks.
Key Risks Highlighted in Fitch’s Assessment
According to Fitch's analysis, the conflict is expected to exert pressure on global growth. The agency noted that economic activity may weaken in the coming period, inflation and bond yields could rise, and geopolitical risks are likely to remain elevated.
However, Fitch also assessed that the recent resilience shown by the global economy and financial conditions has somewhat limited these risks.
Outlook Downgraded for Five Regions
Taking into account the conflict’s potential to spread, Fitch downgraded the sector outlook for five regional economies from "neutral" to "deteriorating."
The only region with an improved outlook was China. Supported by strong exports, China’s outlook was raised to "neutral." The agency noted that crude oil inventories, local refinery capacity, and diverse energy sources could shield China’s economy from potential energy shocks.
Different Pressures on Asia, Gulf, and Europe
Fitch emphasized that strong exports linked to artificial intelligence support many economies in the Asia-Pacific region, but these countries remain vulnerable due to their energy-intensive structures and dependence on oil and natural gas imports through the Strait of Hormuz.
Most Gulf Cooperation Council countries are in a more advantageous position thanks to strong financial structures and alternative export routes. Nevertheless, the agency noted that the security and business environment impacts of the conflicts could be felt for a long time.
In Eastern Europe, geopolitical risks remain high due to the Russia-Ukraine war and tensions between the US and other NATO members.
Energy Prices Affect Growth and Budgets
Fitch stated that rising energy prices negatively affect growth and inflation outlooks in developed economies while increasing pressure on public finances.
The agency also suggested that if the conflict ends quickly, the global sector outlook could return to a "neutral" level.
