Businessmen are skeptical looking at stock market charts.
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As the threat of ’70s-style stagflation rises, the global credit environment is shifting, says Fitch Ratings.

In a new report, the rating agency said the economic fallout from the Russian invasion of Ukraine has upended the global macroeconomic outlook and fundamentally altered the plausible risk scenarios.

“The outlook for monetary tightening has increased notably, as has the potential for stagflation, wherein interest rates and inflation rise faster amid lower-than-expected growth,” Fitch said.

The possibility of a global stagflation scenario is, in turn, altering the credit outlook.

Fitch said the effects of global stagflation “would be most felt in sectors with greater exposures to higher input costs, heightened market volatility and tightened financing conditions.”

This includes the industrial and travel-related sectors, it said, along with finance and securities firms, particularly in emerging markets.

At the same time, increased macroeconomic, financial and geopolitical uncertainty will add to risks posed by asset bubbles, supply chain disruptions, climate transition and the Chinese financial sector, Fitch said.

Other emerging risks include increased cyber threats and the ongoing effects of pandemic-related disruptions, it noted.