Reply #56: Global economy faces rising plausible stress scenarios in 2008-09 - Moody's [View All]

[Ghost Dog]

MUMBAI (Thomson Financial) - Moody's Investors Service said the global economy is at a high level of 'transition risk' and the probability of a highly adverse outcome has increased with the impact of liquidity and credit crisis on the US economy being unclear.

"In this context, any micro-level credit analysis should take account of the broader economic and financial context and consider the credit risk implications of a decidedly less favourable outcome for the world economy," the ratings agency said in a report.

Moody's said the global economic and financial scenario for 2008-09 is one of continued solid growth globally, increased differentiation between advanced and emerging economies with the US facing recessionary headwinds, low to moderate global inflation but buoyant international trade, narrowing global imbalances, a slowly subsiding stress on financial markets.

"..The central scenario for 2008-09 does not mark the end of either the 'Great Moderation' (high growth, low inflation and low volatility) or the 'Interest Rate Conundrum' (the unusual situation of having very low long-term interest rates despite a buoyant world economy)," the report said.

It added that "in this scenario, some financial pain continues to be absorbed, especially as the US economy confronts recessionary forces, while the engines of a globalised economy continue to fire."

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