LONDON : Turkey, other lower-rated emerging markets and some oil producers will face the biggest pressure on credit ratings from the coronavirus, one of S&P Global's top sovereign analysts said recently.

The number of global infections has surpassed 100,000, while widespread shutdowns and travel restrictions are raising concerns of potential global recession.

Credit rating agency S&P has been among those cutting growth forecasts, in recent days and Frank Gill, its senior director of Europe, Middle East and Africa sovereign ratings, said certain country's ratings could also be vulnerable.

''It is not good news for anyone, least of all for emerging markets,'' he told Reuters. ''Where this could cause most distress is the speculative grade countries in the single B space.''

The main issue is whether countries will be able to cope with a major increase in cases, especially if they have less advanced healthcare systems, or if they depend  heavily on tourism or plunging commodities like oil.

Another worry is if domestic currencies tumble, making it more costly to pay debt borrowed in major currencies like dollars.
'' We are looking at Turkey very closely,'' Gill said.

S&P currently has the country on a B+ rating with a stable outlook, but Turkey's large tourism sector which accounts for around 13 percent of its economy, was one of the bright spots last year and ''this coronavirus epidemic is clearly going to weigh on any tourism economy in 2020.''

The country's banks also have a lot of refinancing to do over the next 12 months. At $61.5 billion, that is roughly 8pc of Turkey's GDP. ''That is a lot,'' Gill said.

Turkish companies have around $74 billion in external debt including trade credits and though the government itself only has around $5 billion to refinance this year, there are three large state-owned banks which would need support in a crisis.

''When you see pressure on the Lira, that immediately weighs on creditworthiness of the private sector. So that is not great news.''

Oil producing countries with higher extraction costs, like Oman, are also at risk because of the near 30pc plunge in crude prices this year. [Reuters]


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