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Moody’s raises global forecast for corporate defaults, Cambodia not exempted

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Defaults are expected to be highest in the hotel, gaming and leisure sector along with oil and gas. And all of these will affect globally including Cambodia, as now tourism, service, construction start affecting, especially during the COVID-19 pandemic.

Moody’s Investors Service raised its default forecast for the end of the year Monday to 10.6 percent of the companies it rates, up from 3.5 percent in March.

In a statement issued in Hong Kong, the US-based global credit rating agency forecast a further increase in defaults to 11.3 percent by the end of next year.

“This forecast is underpinned by our expectation of recessions in many large economies,” it said.

Moody’s said it also expected a “very sudden and widespread stop in economic activity, which has not been seen in prior crises.”

In March, Moody’s said these two sectors had the most downgrades in credit ratings.

Moody’s-rated companies that defaulted during the month, two were in oil and gas while two were in metals and mining.

In the three months ended March, the agency said 28 companies defaulted — 20 in North America, five in Asia, two in Europe and one in Latin America.

“Retail is the biggest contributor of defaults year to date, with five,” the agency said.

Moody’s said the higher default forecast reflected “unprecedented” financial turmoil caused by three shocks.

“First, the coronavirus emerged as a pandemic, spreading more widely and rapidly than previously expected, posing a substantial threat to the global economy.

“Second, oil prices plummeted to the US$20s and marked the lowest level in the last two decades.

“Third, financial conditions tightened severely as asset prices fell sharply in both the equity and fixed income markets,” the rating agency said,

Moody’s noted a “faster-than-usual increase” in unemployment and “severe and extensive credit” shocks across many sectors and regions.

“The coronavirus will cause a substantial pullback in consumption and disruption in business,” it said. Sao Da/AKP

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