Kuala Lumpur: Moody’s Investors Service foresees fewer rating actions this year compared to 2020, with Covid-19 pandemic credit risks expected to ease as a slow and uneven recovery starts.
The credit rating agency said although the crisis had created substantial credit challenges over the past year, credit downturn is expected to be relatively short-lived, with risks slanted towards the sectors most vulnerable to restrictions on their normal activities.
“Rating actions would be much more subdued in 2021, unless there is another major shock to global economic activity,” Moody’s said in a statement, citing its research report titled “Coronavirus – Global: Covid-19 One Year On: Opportunities And Hazards Will Drive Differences In Recoveries Across Sectors” released Thursday.
Colin Ellis, its chief credit officer for Europe, the Middle East and Africa (EMEA) and the report’s author, said Moody’s did not expect rating actions this year to match the pandemic-driven activity in 2020.
“Our current ratings and outlooks already incorporate the effects of the pandemic and associated support from policymakers.
“We continue to expect a slow and bumpy recovery, but volatility around the gradual recovery path is unlikely to be enough to materially affect creditworthiness by itself,” he said.
While asset prices and debt issuers’ market access have largely recovered from the shock, Moody’s noted that leverage metrics have shifted more permanently.
“This is particularly evident for sovereigns, some of which have spent unprecedented sums to fight the pandemic and shore up economic activity,” it said.
Debt affordability generally remains strong, Moody’s said, adding that issuers’ management of their debt dynamics as Covid-19 fades as a public health threat, would be a critical determinant of their creditworthiness
“Yet while these higher leverage levels pose significant medium-term risks, we do not expect defaults to jump again over the near term,” it said.
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