A record 33 sovereign ratings have been downgraded by Fitch Ratings during the first half of this year, and the agency has placed the credit ratings of 40 countries or sovereign entities on a "negative" outlook while the coronavirus pandemic continues to slam governments' finances.
"We've never in the history of Fitch Ratings had 40 countries on negative outlook at the same time," James McCormack, Fitch's global head of sovereign ratings, said on CNBC's "Capital Connection" Friday.
The countries whose sovereign ratings are listed under a negative outlook still could be downgraded by Fitch.
"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,” said McCormack.
Fitch has already downgraded sovereign credit ratings for the United Kingdom, Australia, and Hong Kong.
Because many governments increased spending to protect their economies from severe damages from the coronavirus pandemic, it's expected that the financial positions of all 119 countries rated by Fitch could face a deterioration, said McCormack.
According to the International Monetary Fund, the lockdown measures many countries imposed to curb the spread of coronavirus hurt the global economy more than had been expected. It warned global public debt may reach an all-time high level of over 100% of the world's gross domestic product.
Fitch warned in a May report that sovereign defaults could hit a record not only because of the pandemic but also because of the weakening oil prices. Lebanon, Ecuador, and Argentina have all defaulted on their debts this year, the report said.
“Our concern really is what happens after we get to the other side of the coronavirus crisis period,” McCormack said, adding that Fitch will watch governments to determine if they can bring down their debt levels. "I think that’s the focus that we have and that will really be the factor that determines where the ratings go.”
Sandy Fitzgerald has more than three decades in journalism and serves as a general assignment writer for Newsmax covering news, media, and politics.
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