Tighter credit conditions to constrain the recovery
Global bank credit standards continued to tighten in Q3 and early Q4, despite a rebound in world GDP in Q3. Although the pace of tightening in the US is moderating and the picture in most emerging markets is not too alarming, tighter credit could hold back the recovery in the quarters ahead.
A key factor depressing demand for corporate credit is weaker investment. In addition, the level of US credit standards across a range of loan categories is now decisively tighter than the average level since 2005. These factors point to potential negative effects on medium-term growth.
In emerging markets, credit standards are tightening in most economies but the picture is mixed and not very negative in most cases. Meanwhile, credit conditions have generally eased in China this year, a positive factor for the global outlook.