The global economic outlook has significantly worsened according to Fitch Ratings in their mid-year review of 2025 sector performance. This evaluation highlights a stark decline in credit drivers since early 2025, with 57 out of 288 sector outlooks revised, nearly all noting a shift towards deterioration. Factors influencing this trend include trade and tariff uncertainties, sluggish economic growth predictions, persistent high interest rates in the U.S., and ongoing geopolitical risks.
Fitch has acknowledged that its macroeconomic forecasts have notably declined since the end of 2024. The lingering worries regarding tariffs have impacted investment confidence and consumer demand. While many sector assessments remain neutral, a concerning 29% are categorized as “deteriorating,” in stark contrast to just 10% at the beginning of the year.
The outlook for six of the eight sovereign regions is equally grim, with declining growth forecasts linked to heightened tariffs and policy instability. Latin America and the Middle East/North Africa stand out as exceptions, maintaining neutral outlooks in this troubled environment. In the realm of non-financial corporations, key credit metric projections have also taken a hit, paralleling the declining economic outlook.
More than half of corporate sectors are designated as “deteriorating,” although the aerospace and defense sector remains a rare positive exception with an “improving” outlook. The financial sector is not immune, as several bank and insurance outlooks have been marked down to “deteriorating,” particularly those firms with considerable exposure to trade-dependent downturns. Additionally, over one-third of structured finance sectors are facing bleak asset performance predictions due to adverse macroeconomic conditions.
Overall, these sector outlooks reflect a forward-looking assessment of operational and business environments compared to the previous year, signifying a challenging landscape ahead.