Commodity Online
NEW YORK, July 2, 2009--Although there are tentative signs of a bottoming of a protracted global recession, the credit outlook for the corporate and government sectors and for financial institutions remains negative with credit deterioration continuing for the remainder of 2009, according to a recent report published by Standard & Poor's.

In the report, entitled, "2009 Midyear Outlook: A Tough Road To Recovery For Global Markets ," Standard & Poor's chief economist and practice leaders of Standard & Poor's Ratings Services discussed the prospects facing the global economy and credit markets for the remainder of 2009 and into 2010.

Standard & Poor's chief economist David Wyss notes that the recovery will likely be delayed until the fall of 2009 and that the recession has proven to be much longer and deeper than expected. Mr. Wyss also notes that U.S. household net worth from peak to trough has dropped 21% since the end of 2007. That's the result of the 57% drop in the stock markets combined with a 32% decline in home prices.

In the corporate ratings universe, downgrades have exceeded upgrades by 14 to 1 in 2009 and Standard & Poor's expects credit deterioration to continue throughout the rest of the year. "The current projection is more than 200 defaults in 2009 of nonfinancial corporate issuers in the U.S. and, again, that's predominantly because of the recessionary environment," said Standard & Poor's Managing Director John Bilardello. "But on top of that, as we look forward into 2010, there's a large amount of debt coming to maturity that will start to spike in 2010 through 2014. That's going to weigh very heavily on corporate credit quality and the ability to refinance that debt, starting now and carrying through the next four or five years," he added.
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In U.S. Public Finance, Standard & Poor's Managing Director William Montrone remarked that the federal stimulus package has been a big boon to state governments, but questions whether it's been stimulative. "For the most part, of the roughly $200 billion that's been allocated through this program to the states -- about $135 billion of that is earmarked, some for Medicaid assistance and others for what they call stabilization funds. But it's really earmarked for education. So what the states have really done is plug significant budget holes with those monies rather than create new spending programs," said  Montrone.

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