Highly indebted borrowers with debt coming due face greater refinancing pressure, while investors are likely to scrutinise returns on AI spending.
Key Highlights
- Moody’s expects global credit conditions to weaken in 2027 even as major economies continue to expand.
- Higher financing costs and elevated energy prices are the main sources of pressure.
- Borrowers with high debt and large near-term repayments are more exposed to rising refinancing costs.
- Investors are expected to examine whether AI spending generates enough revenue and productivity gains to justify the investment.
New Delhi, Nov 10 — Global credit conditions are expected to weaken in 2027 as higher financing costs and elevated energy prices put pressure on borrowers, Moody’s Ratings said on Tuesday. In its 2027 Global Credit Conditions Outlook, the agency said it expects these pressures to emerge even as major economies continue to expand.
Borrowers with high debt and substantial repayments due in the near term are likely to face greater pressure. When existing debt matures, companies that need to replace it may have to borrow at higher rates. That can raise interest expenses and leave less cash available for operations and investment.
Investors to scrutinise returns on AI spending
Moody’s expects investment in artificial intelligence to remain substantial in 2027. Investors, however, are likely to pay closer attention to whether the revenue and productivity gains from AI justify the scale of spending.
The agency expects the impact on business models to become clearer. Some companies could benefit from stronger demand or use AI to improve productivity. Others could face more competition and find it harder to maintain prices. Those differences will help determine which companies can turn AI investment into stronger earnings and which face pressure on margins.
Policy shifts to shape credit outcomes
Moody’s expects governments to play a larger role in shaping credit outcomes through tariffs, regulation, export controls and strategic investment. Many of these measures can be introduced or reversed through executive action, allowing policy to change quickly. The agency expects those shifts to continue influencing trade, competition and where businesses and investors put their money in 2027.
Spending on energy security, critical minerals, defence and climate resilience is also expected to have uneven effects. It could create opportunities for companies that supply goods and services in those areas, while raising costs elsewhere.
The outlook points to differing pressures across sectors and borrowers. A company facing large debt repayments may feel the impact through higher interest bills, while an energy-intensive business could face pressure on operating costs. For companies spending heavily on AI, the question will be whether gains in sales or efficiency are large enough to support that spending.
