The sudden decline in oil prices and the rapid spread of the novel coronavirus (Covid-19) will have negative effects on ratings of institutions and countries, Moody's said in a statement on Monday.
The global rating agency said the rapid spread of the coronavirus around the world has led to a deteriorating economic outlook, low oil prices and upheaval in financial markets worldwide, generating an unprecedented credit shock across many sectors around the world.
Although monetary easing by central banks and associated fiscal policy initiatives are expected to help relieve some of the pressures on liquidity, it is anticipated to weigh on profitability of the financial sector, it said.
Moody's said disruption of economic activity around the world is forecast to last through June this year, but some recovery is expected in the second half of 2020.
Until the end of the first half of 2020, 'the coronavirus outbreak as well as the oil price shock will have a direct negative impact on the asset quality of rated financial institutions,' Moody's said in the statement.
The rating agency stressed that countries and institutions that are highly exposed to Covid-19 along with low oil prices will have 'the greatest potential negative credit implications,' adding that they are also 'most likely to experience ratings downgrades.'
By Ovunc Kutlu