Credit-rating agency Moody’s has changed its outlook on six Latin American banking systems to negative in light of the coronavirus outbreak and broad economic deterioration. These are Brazil, Central America, Colombia, Panama, Paraguay and Uruguay. At the same time, the firm has maintained its negative outlook on Argentina and Mexico and its stable outlook on Peru.
The negative outlook reflects Moody’s expectation that the broad and growing scope of economic and market disruption from the coronavirus outbreak will increasingly strain banks’ operating environment and loan performance. Weaker business prospects and restrictions on social interactions will hit economic activity this year, and Moody’s projects a contraction in global economic growth in 2020.
Moody’s expects the hotel and restaurant, airline, automotive, and retail sectors to be the most severely hit, and that small and mid-sized enterprises (SMEs) will be particularly vulnerable.