Fitch Ratings has downgraded a record 33 sovereign ratings in the first half of this year — and the agency is not done yet as the coronavirus pandemic pummels government finances.
James McCormack, Fitch’s global head of sovereign ratings, said the agency has placed the credit ratings of 40 countries or sovereign entities on a “negative” outlook. That means those ratings have the potential to be downgraded.
“We’ve never in the history of Fitch Ratings had 40 countries on negative outlook at the same time,” he said on Friday.
“That comes after we’ve already downgraded in the first half of the year 33 sovereigns. We’ve never downgraded 33 in any given year, so we’ve already done it in half a year,” he added.
Sovereign credit ratings that Fitch has downgraded include the U.K. and Hong Kong.
McCormack explained many governments have increased spending to shelter their economies from being severely hit by the coronavirus pandemic. That’s expected to cause a deterioration in the financial positions of all 119 countries rated by Fitch, he said.
Such deterioration could take the form of larger deficits or smaller surpluses in the government budgets, or an increase in debt, he added.
The International Monetary Fund has said that lockdown measures imposed in many countries to curb the spread of the coronavirus have hurt the global economy more than expected. The fund warned that global public debt could reach an all-time high of over 100% of the world’s gross domestic product.
Fitch, in a May report, also warned that sovereign defaults could hit a record this year due to the coronavirus pandemic and weakness in oil prices. Argentina, Ecuador and Lebanon have defaulted on their debt this year, the agency said in the report.
McCormack said the agency will be watching whether governments can bring down their debt levels after economies emerge from the coronavirus pandemic.
“Our concern really is what happens after we get to the other side of the coronavirus crisis period,” he said. “I think that’s the focus that we have and that will really be the factor that determines where the ratings go.”