Divergent corporate credit trends forecast for 2024: Fitch Ratings highlight regional disparities, rising default rates

NEW DELHI: In a recent report, Fitch Ratings highlighted diverging corporate credit trends by region and credit quality in 2024. Despite lower economic growth, global credit metrics are anticipated to remain stable or improve.

Fitch's fifth edition of the Global Corporates Macro and Sector Forecast reveals varying revenue, margin, and leverage trends across regions, with default rates expected to rise among lower-quality, speculative-grade issuers due to economic challenges and high interest rates.

The forecast indicates a slightly lower aggregate EBITDA leverage of 2.7x in 2024 compared to 2.8x in 2023, with North America and APAC experiencing declines, while EMEA and LATAM show a slight increase.

The report projects a recovery in revenue growth of 1.8 per cent in 2024 after a 1.7per cent decline in 2023.

EBITDA margin is expected to expand globally to 17.7 per cent in 2024, with varying trends across regions.

High-yield (HY) and investment-grade issuers are expected to follow similar trajectories in 2024, but HY issuers face greater challenges due to high interest rates.

The report suggests an increase in default rates for US and European leveraged loans and HY bonds in 2024.

Notable changes in key performance indicators include an upward revision in global new vehicle sales to 89.8 million and adjustments in retail sales and US housing starts.

The overall credit outlook for global corporates is neutral, but concerns arise for U.S. and EMEA leveraged finance, reflecting expectations of higher default rates.

As economic conditions continue to evolve, these insights provide a comprehensive overview of the complex landscape shaping corporate credit in 2024.