Credit Outlook Global Public-Private Partnerships: Stability Amid Economic and Environmental Shifts in 2025

Morningstar DBRS published a credit outlook for global public-private partnerships (PPPs): "Stability Amid Economic and Environmental Shifts in 2025." We anticipate stability in the credit profiles of our rated PPPs despite a challenging economic backdrop. Inflation pressures have eased from previous highs, but global growth is expected to remain subdued. Persistent inflation and high interest rates are affecting economic momentum in major regions. However, strong household balance sheets and sustained demand are expected to mitigate recession risks, limiting both the severity and duration of economic slowdowns.

Key Highlights:
-- Our outlook for PPPs in 2025 remains stable, supported by the demand for essential assets, structural protections, and the ability to adapt to broader economic and environmental changes.
-- Specific project-level factors - such as traffic volatility, cost escalations, and increasing debt levels - may influence individual credit trajectories within the sector.
-- While PPPs have demonstrated resilience, new project developments may be affected by an evolving political landscape, changing risk tolerance, and elevated Environmental, Social, and Governance requirements.
-- The progressive PPP model is becoming more popular in delivering large and complex infrastructure projects as a more flexible alternative to the traditional PPP delivery method, as it allows for iterative collaboration between public and private entities, enabling adjustments to project scope, design, and risk allocation as a project evolves.

"The 2025 outlook for PPPs remains favorable," says Blanca Cabrera, Vice President, Asset Finance. "We believe PPPs will continue demonstrating resiliency against economic downturns or black swan events and will be able to withstand potential challenges up ahead."