Home / News / India /  Covid-19 impact: Fitch says may have to downgrade countries multi-notch

Days after slashing India’s growth forecast to a three-decade low of 2% for FY21, Fitch Ratings on Tuesday said the rapid deterioration in the global sovereign rating outlook due to the coronavirus outbreak and sharp fall in oil prices may force it to make multi-notch downgrades of many countries through 2020.

“While we endeavour to rate through economic cycles, multi-notch sovereign downgrades are more common during economic and financial crises of the type the global economy and credit markets are now entering. Our forecasts and expectations for example, regarding sovereigns’ debt trajectories or their ability to access financing can be dramatically altered by the nature and speed of the pandemic and government responses," it cautioned.

Fitch, however, clarified that its commentary does not identify specific sovereigns that might be vulnerable to multi-notch downgrades, as it continues to assess sovereign creditworthiness case-by-case and the subsequent crisis and policy responses.

“However, conditions that have typically formed the backdrop to such rating actions in the past are clearly coalescing again."

The growth forecast by Fitch for India released last week as an update to its Global Economic Outlook is the lowest among other major rating agencies such as S&P (3.5%) and Moody’s (2.5%).

Last December, Fitch had reaffirmed India’s sovereign credit rating at the lowest investment grade (BBB-) with a stable outlook, holding that the country’s rating balances a still strong medium-term growth outlook compared with “BBB" category peers and relative external resilience.

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