Economic Risk
Inflation, Credit and Fiscal Tightening
Multiple factors have contributed to the expectation of a U.S. slowdown in 2025, including the lingering effects of prior monetary tightening and dollar strength, diminished fiscal tailwinds and higher tariffs. While a recession is not the most likely outcome according to S&P Global Market Intelligence’s World Economic Service,[1] there are various risks to monitor, including an escalation of trade tensions. Europe’s largest economies have continued to struggle, and the weakness in Germany has been particularly persistent. The U.K.’s fiscal problems will remain a hindrance to growth, with the government facing another round of budget tightening in the autumn.
In a highly volatile environment, reliable macro forecasting and proactive credit risk assessments can improve capital access and investor confidence. Global companies operating in numerous markets must stay on top of government policies, regulations and political disruptions, since import restrictions and trade agreements can significantly impact profit margins. Operations may also be vulnerable to geopolitical risks, including sanctions. By continuously monitoring these economic and political factors, companies can adapt their strategies to changing conditions to drive well-informed investment decisions.
Under today’s circumstances, monitoring credit risk becomes increasingly important for businesses as they navigate the ever-changing environment. Members of the underwriting team at this commercial bank needed to assess the creditworthiness of different companies to determine whether a loan should be offered and, if so, at what price. They wanted to enhance their analysis by quickly getting data to understand the financial stability of companies and any signs of potential credit deterioration. They subscribed to S&P Global Market Intelligence’s RiskGaugeTM, which provides credit scores[2] that align to S&P Global Ratings probabilities of default or a scale of 1-100 using extensive public and private datasets or internal data. Pre-calculated scores are also instantly available, covering small- and medium-sized enterprises, large corporations and financial institutions.
[1] "Global Economic Outlook: July 2025", S&P Global Market Intelligence, July 17, 2025, www.spglobal.com/market-intelligence/en/news-insights/research/global-economic-outlook-july-2025.
[2] S&P Global Ratings does not contribute to or participate in the creation of credit scores generated by S&P Global Market Intelligence. Lowercase nomenclature is used to differentiate S&P Global Market Intelligence credit model scores from the credit ratings issued by S&P Global Ratings.
The value of loans, bonds, deposits and other financial instruments can also be significantly affected by changes in interest rates. High-quality, independent pricing data can help financial institutions navigate evolving market conditions and increasing scrutiny on valuations resulting from regulations such as Solvency II and Basel frameworks. S&P Global Market Intelligence’s Pricing Data covers a wide range of fixed income and derivative asset classes, including market-leading credit default swaps (CDS) and loan franchises, CLOs and bonds in the municipal, corporate and global securitized sectors.