JEDDAH — Global financial conditions are tighter at the beginning of 2019 than they were a year ago. This is because of higher interest rates after the Federal Reserve hiked its policy rate by 100 basis points in 2018, concerns about weaker growth in Europe and China, uncertainties surrounding Brexit, international trade tensions, and the damage to confidence by a US government shutdown, latest S&P Global Ratings said.

The report said banking systems in emerging markets face three major risks in 2019 amid gradually slowing growth. These risks are a deterioration in asset quality indicators, vulnerability to external capital outflows, and investors’ evolving perceptions of risks in emerging markets.

The study found that investors have accelerated their exit from several countries, and that they are differentiating less between these countries.

For emerging markets, the Fed’s decision in its Jan. 30 meeting to keep rates stable has provided some relief. But the underpinnings of this relief – slower global growth – suggest that 2019 could be another turbulent year.

S&P Global Ratings considers the top global risks to be: 1) the possibility of a financing squeeze in a mature credit cycle; 2) trade disruption from a further escalation of the US-China tariff dispute;

3) potential vulnerabilities in emerging markets, particularly for those with weak fiscal positions (such as Argentina, Brazil, Egypt, Lebanon, Oman, and Pakistan) or challenging growth prospects (Argentina, Ecuador, South Africa, and Turkey); and 4) the high level of private sector external debt in some emerging markets, such as Turkey and Qatar. — SG