Credit conditions for emerging markets in 2019 will be more challenging as global growth slows, said says Moody's Investors Service in a new report, giving a negative outlook for Turkey and parts of Africa and mixed for the Middle East.

"Commodity price trends, tightening global financial conditions, and domestic and geopolitical issues will drive credit risks to different degrees for issuers in Africa and the Middle East," said Moody's managing director Atsi Sheth.

"In this context, policy responses could be important determinants of credit conditions. Turkey faces mounting institutional challenges and policy uncertainty, and there are also ongoing hurdles to reform in parts of the Gulf Cooperation Council."

Moody's expects Turkey to have significantly slower economic activity than before, with GDP growth of 1.5 per cent in 2018, followed by a 2.0 per cent contraction in 2019.

For issuers in many countries in the GCC and in Africa, a continuing growth recovery should support credit conditions, said the report titled "Emerging Markets -- Global: 2019 outlook broadly stable; higher rates, politics and trade tensions pose some risks".

However, growth rates will remain below levels achieved before the 2014-15 slump in commodity prices, and a significant escalation in global trade tensions could further dampen growth.

Moreover, the risk remains that stress in a few emerging markets could disrupt international financial flows to others, as seen in 2018.

Overall, issuers in countries with domestic macroeconomic or political challenges are more vulnerable to episodes of global investor risk aversion, while those in countries with large, growing domestic markets and multiple instruments in their policy toolboxes are more resilient. – TradeArabia News Service