Fitch Says Upgrades of Major Economies Unlikely in 2021 Despite COVID-19 Vaccine

December 9, 2020 Updated: December 9, 2020

Fitch Ratings told Reuters on Tuesday that upgrades of any major economy are unlikely in 2021 despite recent developments related to COVID-19 vaccination, and that countries in Latin America, the Middle East, and Africa show the highest level of vulnerability to further negative action in the coming year.

“We have only two sovereign ratings (Cote d’Ivoire and New Zealand) on Positive Outlook so upgrades of any major economies currently look unlikely in 2021,” Tony Stringer, chief operating officer of the rating agency’s Global Sovereigns and Supranationals, said in an emailed response to questions posed by Reuters.

“The two regions that have already seen the most rating downgrades (Latin America and Middle East & Africa) display the highest level of vulnerability to further negative action, with 9 and 12 Negative Outlooks respectively,” Stringer said.

Countries hit hard by the coronavirus will see the maximum economic boost from an effective vaccine which is rolled out swiftly in the first half of next year, Brian Coulton, Fitch’s chief economist told Reuters.

“All developed countries will clearly benefit (from a vaccine) but the UK, Spain, France and Italy were among the hardest hit in H1 2020 and the UK and the EU (European Union) have placed very large pre-orders of the Pfizer, Moderna and Oxford-AstraZeneca vaccines,” he said.

Coulton also said that the start of 2021 will be weak in Europe and the United States as a result of recently tightened restrictions and that the clearest benefits in annual growth numbers will be seen in 2022.

Fitch’s chief economist said that the rating agency expects a slower vaccine roll out in emerging markets as the logistics of rolling out mass immunization programs could be more challenging, while vaccine pre-orders have been more modest.

The remarks come as coronavirus cases are still surging globally, with COVID-19 infections being at their peak in the United States, where an average of 193,863 new cases were reported each day over the past week, according to a Reuters tally.

“There are also some signs that the U.S. economy is starting to be affected by the recent surge in cases and renewed restrictions, though lockdown responses to date have been much less aggressive there, helping to explain its relatively shallower downturn in 2020,” Coulton told Reuters.

U.S. regulators stepped closer to approving the Pfizer COVID-19 vaccine on Tuesday as a 90-year-old British woman became the first person outside of trials to receive the shot, offering hope of slowing a pandemic that has pushed hospitals to the brink.

Fitch said earlier on Tuesday that uncertainties over the spread of coronavirus, as well as its immediate and longer-term economic implications will continue to exert pressure on global public finances in 2021.

Global gross domestic product recovery will strengthen from mid-2021 with vaccine rollouts now looking imminent, the agency noted.

Moody’s told Reuters last week that most sovereigns face a “significant negative shock” from the pandemic while S&P Global said in October that some of the world’s top economies could see their credit ratings cut or put on downgrade warnings in the coming months.

By Kanishka Singh