Key Takeaways
- • Moody's Ratings expects global credit conditions to weaken in 2027, driven by higher financing costs and elevated energy prices that pressure both public and private finances, according to its global credit outlook report.
- • Moody's identifies four interconnected themes shaping credit risk: rising cost of credit, higher energy prices, AI transformation and investment, and government intervention through tariffs and regulation.
- • Refinancing pressure will be heaviest for highly leveraged companies and governments with wide deficits or short-dated debt, as much long-duration debt was issued when global rates were at record lows.
- • Moody's estimates AI investment will approach $1 trillion in 2027 but grow more slowly, with completed and planned projects facing greater scrutiny over revenue coverage of costs and debt service.
- • Moody's estimates consolidated global government debt will rise by $39 trillion between 2027 and 2030, pressuring sovereign finances and the availability and cost of credit for private borrowers.
Summary
Moody's Ratings expects global credit conditions to weaken in 2027 as higher financing costs and elevated energy prices create pressure on both public and private finances, according to the agency's global credit outlook report for 2027. The report identifies four interconnected themes that will drive credit risks and opportunities across sectors and regions: rising credit costs, higher energy prices, the ongoing impact of AI transformation and the large investments going into AI technology and infrastructure, and government intervention through tariffs and regulations. It also flags a growing focus on energy security, critical minerals, defence and climate resilience, which Moody's says will create opportunities for some sectors while raising costs for others.
Moody's analysts said credit costs will continue to rise over the coming year. Issuers refinancing maturing debt will often face higher rates than when they originally borrowed, since much government and private long-duration debt was raised when global interest rates were at record lows. Refinancing pressure will be greatest for highly leveraged companies and for governments running wide deficits or carrying short-dated debt. The report also said higher rates are making investors more selective, and that greater use of liquidity-preserving measures points to stress in parts of private credit. Banks and life insurers are expected to be the exception, as higher rates support their earnings.
AI investment is expected to remain massive, approaching $1 trillion in 2027 by Moody's estimates, but to grow more slowly. Completed and planned projects will face greater scrutiny as investors assess whether revenues can cover costs and debt service. Moody's noted that rapid technological change could shorten some assets' useful lives and lengthen payback periods.
Governments in the largest economies are intervening more through regulation, tariffs, export controls and strategic investment. Moody's said many of these tools can be introduced or reversed by executive action, so policy can shift quickly even where legislative gridlock stalls broader reform. Governments and companies are also spending more to secure energy, critical minerals, defence equipment and other strategic inputs, and to protect infrastructure from physical climate risks. While this creates opportunities for producers and for those who spend effectively, the report said it also raises costs across the broader economy. Aging power networks, growing data center power demand and water availability in some regions are cited as emerging credit issues.
Moody's estimates consolidated government debt worldwide will rise by $39 trillion between 2027 and 2030. The report warns this will pressure government finances and also affect the availability and cost of credit for private borrowers.
Moody's analysts said credit costs will continue to rise over the coming year. Issuers refinancing maturing debt will often face higher rates than when they originally borrowed, since much government and private long-duration debt was raised when global interest rates were at record lows. Refinancing pressure will be greatest for highly leveraged companies and for governments running wide deficits or carrying short-dated debt. The report also said higher rates are making investors more selective, and that greater use of liquidity-preserving measures points to stress in parts of private credit. Banks and life insurers are expected to be the exception, as higher rates support their earnings.
AI investment is expected to remain massive, approaching $1 trillion in 2027 by Moody's estimates, but to grow more slowly. Completed and planned projects will face greater scrutiny as investors assess whether revenues can cover costs and debt service. Moody's noted that rapid technological change could shorten some assets' useful lives and lengthen payback periods.
Governments in the largest economies are intervening more through regulation, tariffs, export controls and strategic investment. Moody's said many of these tools can be introduced or reversed by executive action, so policy can shift quickly even where legislative gridlock stalls broader reform. Governments and companies are also spending more to secure energy, critical minerals, defence equipment and other strategic inputs, and to protect infrastructure from physical climate risks. While this creates opportunities for producers and for those who spend effectively, the report said it also raises costs across the broader economy. Aging power networks, growing data center power demand and water availability in some regions are cited as emerging credit issues.
Moody's estimates consolidated government debt worldwide will rise by $39 trillion between 2027 and 2030. The report warns this will pressure government finances and also affect the availability and cost of credit for private borrowers.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.