Moody’s Investors Service announced Thursday that it anticipates making fewer ratings downgrades this year than in 2020 due to the continued global economic recovery and the forward-looking nature of the ratings already made.
In a new research report released today, Moody’s says that rating upgrades are likely to be more evenly balanced between upgrades and downgrades this year than in 2020, with upgrades accounting for a larger percentage of all changes this year.
“Therefore, the net rate of downgrades is likely to decline further,” Moody’s notes.
“If economic and credit conditions evolve as expected, this will be consistent with Moody’s existing ratings positioning, rather than trigger widespread upgrades, given the forward-looking nature of the ratings,” the rating agency explains.
Moody’s says it expects simultaneous recoveries in some credit metrics to slow the economic recovery.
“The global economic recovery continues to take shape, reflecting both consumer and business adaptation to social distancing and other public health measures, significant supportive measures from governments and other policymakers, and the continued rollout of vaccines,” it adds.
However, Moody’s continues to expect “the recovery to be slow and bumpy overall, and to be heterogeneous across countries and sectors as the pandemic lingers,” and stresses that “the recovery has led to a turnaround in the credit cycle, with the 12-month global speculative default rate peaking at 6.8% in December 2020, and since then falling to 5.6% in April.”
“We expect the default rate to decline further over the next 12 months as economic, financial and credit conditions continue to stabilize,” Moody’s says, specifying that the firm has taken “a significant number of downward rating changes during 2020 to reflect the credit impact of the pandemic.”
