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Moody's - Outlook negative for Spanish regional governments as fiscal consolidation trend will reverse in 2021

·23 min read

<!DOCTYPE html> <html lang="" xml:lang=""> <head> <title>/nwsys/www/images/PBC_1258661</title> <meta http-equiv="Content-Type" content="text/html; charset=UTF-8"/> <meta name="generator" content="pdftohtml 0.36"/> <meta name="date" content="2021-01-12T02:50:36+00:00"/> <style type="text/css"> <!-- .xflip { -moz-transform: scaleX(-1); -webkit-transform: scaleX(-1); -o-transform: scaleX(-1); transform: scaleX(-1); filter: fliph; } .yflip { -moz-transform: scaleY(-1); -webkit-transform: scaleY(-1); -o-transform: scaleY(-1); transform: scaleY(-1); filter: flipv; } .xyflip { -moz-transform: scaleX(-1) scaleY(-1); -webkit-transform: scaleX(-1) scaleY(-1); -o-transform: scaleX(-1) scaleY(-1); transform: scaleX(-1) scaleY(-1); filter: fliph + flipv; } --> </style> </head> <body bgcolor="#A0A0A0" vlink="blue" link="blue"> <!-- Page 1 --> <style type="text/css"> <!-- p {margin: 0; padding: 0;} .ft00{font-size:18px;font-family:Times;color:#000000;} .ft01{font-size:18px;font-family:Times;color:#1257c7;} .ft02{font-size:13px;font-family:Times;color:#0d0c0c;} .ft03{font-size:13px;font-family:Times;color:#000000;} .ft04{font-size:13px;font-family:Times;color:#1b62b7;} .ft05{font-size:13px;line-height:30px;font-family:Times;color:#0d0c0c;} --> </style> <div id="page1-div" style="position:relative;width:918px;height:1188px;"> <img width="918" height="1188" src="http://mco.acquiremedia.com/images/PBC_1258661001.png" alt="background image"/> <p style="position:absolute;top:155px;left:108px;white-space:nowrap" class="ft00"><b>Research Announcement:&#160;</b></p> <p style="position:absolute;top:155px;left:364px;white-space:nowrap" class="ft01"><b>Moody's - Outlook negative for Spanish</b></p> <p style="position:absolute;top:180px;left:108px;white-space:nowrap" class="ft01"><b>regional governments as fiscal consolidation trend will reverse in 2021</b></p> <p style="position:absolute;top:244px;left:108px;white-space:nowrap" class="ft02">Madrid, January 12, 2021 --</p> <p style="position:absolute;top:274px;left:108px;white-space:nowrap" class="ft03">»&#160;High coronavirus-driven social expenses – mainly healthcare costs – will continue to exert</p> <p style="position:absolute;top:294px;left:127px;white-space:nowrap" class="ft03">pressure on regions’ budgets</p> <p style="position:absolute;top:324px;left:108px;white-space:nowrap" class="ft03">»&#160;Lower operating revenues, combined with higher expenditures, will lead to larger deficits in 2021</p> <p style="position:absolute;top:360px;left:108px;white-space:nowrap" class="ft02">The 2021 outlook is negative for Spanish regional governments, reflecting the coronavirus-driven</p> <p style="position:absolute;top:379px;left:108px;white-space:nowrap" class="ft05">reversal in the fiscal consolidation trend, Moody’s Investors Service said in a report published today.<br/>Lower operating revenues, combined with higher expenditures, will lead to larger deficits in 2021.</p> <p style="position:absolute;top:429px;left:108px;white-space:nowrap" class="ft02">Considering the uncertainty surrounding Spain’s economic recovery, it will be challenging for regions</p> <p style="position:absolute;top:449px;left:108px;white-space:nowrap" class="ft02">to redress the 2021 deficits over the short term, particularly if nationwide tax revenue growth will be</p> <p style="position:absolute;top:468px;left:108px;white-space:nowrap" class="ft05">lower than expected.<br/>“We expect total regional debt for Moody’s rated regions to increase on the back of higher deficit</p> <p style="position:absolute;top:518px;left:108px;white-space:nowrap" class="ft02">levels. Rising debt and slowing operating revenue growth will lead to a deterioration of regions’</p> <p style="position:absolute;top:537px;left:108px;white-space:nowrap" class="ft02">debt-to-operating-revenue ratios. The ratio of net direct and indirect debt to operating revenue will</p> <p style="position:absolute;top:557px;left:108px;white-space:nowrap" class="ft02">increase to around 193% by the end of 2021 from 187% in 2019 and 2020, according to Moody’s</p> <p style="position:absolute;top:576px;left:108px;white-space:nowrap" class="ft02">estimates. This will mark a break in the debt reversal trend that began in 2016, ” says Marisol</p> <p style="position:absolute;top:596px;left:108px;white-space:nowrap" class="ft05">Blázquez, Assistant Vice President - Analyst at Moody’s Investors Service.<br/>Regions will benefit from additional central government transfers and EU funds in 2021, although</p> <p style="position:absolute;top:646px;left:108px;white-space:nowrap" class="ft02">they are unlikely to completely offset the impact of the coronavirus shock. Overall, regions’</p> <p style="position:absolute;top:665px;left:108px;white-space:nowrap" class="ft02">funding needs will increase to around €49 billion from €34.5 billion in 2019 (around €44 billion</p> <p style="position:absolute;top:685px;left:108px;white-space:nowrap" class="ft02">forecasted for 2020). The majority of these regional funding needs will be covered through the</p> <p style="position:absolute;top:704px;left:108px;white-space:nowrap" class="ft02">central government’s liquidity mechanisms- Fondo de Facilidad Financiera (FFF) and Fondo de</p> <p style="position:absolute;top:724px;left:108px;white-space:nowrap" class="ft05">Liquidez Autonómico (FLA).<br/>Subscribers can access the report at:&#160;</p> <p style="position:absolute;top:754px;left:372px;white-space:nowrap" class="ft04">http://www.moodys.com/researchdocumentcontentpage.aspx?</p> <p style="position:absolute;top:774px;left:108px;white-space:nowrap" class="ft04">docid=PBC_1258017</p> <p style="position:absolute;top:804px;left:108px;white-space:nowrap" class="ft02">NOTE TO JOURNALISTS ONLY: For more information, please call one of our global</p> <p style="position:absolute;top:823px;left:108px;white-space:nowrap" class="ft02">press information hotlines: New York <PhoneNo>+1-212-553-0376</PhoneNo>, London <PhoneNo>+44-20-7772-5456</PhoneNo>, Tokyo</p> <p style="position:absolute;top:843px;left:108px;white-space:nowrap" class="ft02"><PhoneNo>+813-5408-4110</PhoneNo>, Hong Kong <PhoneNo>+852-3758-1350</PhoneNo>, Sydney <PhoneNo>+61-2-9270-8141</PhoneNo>, Mexico City</p> <p style="position:absolute;top:862px;left:108px;white-space:nowrap" class="ft02"><PhoneNo>001-888-779-5833</PhoneNo>, São Paulo <PhoneNo>0800-891-2518</PhoneNo>, or Buenos Aires <PhoneNo>0800-666-3506</PhoneNo>. You can also email</p> <p style="position:absolute;top:882px;left:108px;white-space:nowrap" class="ft05">us at mediarelations@moodys.com or visit our web site at www.moodys.com.<br/>This publication does not announce a credit rating action. For any credit ratings referenced in this</p> <p style="position:absolute;top:932px;left:108px;white-space:nowrap" class="ft02">publication, please see the ratings tab on the issuer/entity page on&#160;</p> <p style="position:absolute;top:932px;left:574px;white-space:nowrap" class="ft04">www.moodys.com</p> <p style="position:absolute;top:932px;left:701px;white-space:nowrap" class="ft02">&#160;for the most</p> <p style="position:absolute;top:951px;left:108px;white-space:nowrap" class="ft05">updated credit rating action information and rating history.<br/>Marisol Blazquez</p> <p style="position:absolute;top:1001px;left:108px;white-space:nowrap" class="ft02">AVP-Analyst</p> <p style="position:absolute;top:1020px;left:108px;white-space:nowrap" class="ft02">Sub-Sovereign Group</p> <p style="position:absolute;top:1040px;left:108px;white-space:nowrap" class="ft02">Moody's Investors Service Espana, S.A.</p> </div> <!-- Page 2 --> <style type="text/css"> <!-- p {margin: 0; padding: 0;} .ft06{font-size:13px;font-family:Times;color:#0d0c0c;} .ft07{font-size:13px;line-height:22px;font-family:Times;color:#0d0c0c;} --> </style> <div id="page2-div" style="position:relative;width:918px;height:1188px;"> <img width="918" height="1188" src="http://mco.acquiremedia.com/images/PBC_1258661002.png" alt="background image"/> <p style="position:absolute;top:114px;left:108px;white-space:nowrap" class="ft02">JOURNALISTS: 44 20 7772 5456</p> <p style="position:absolute;top:133px;left:108px;white-space:nowrap" class="ft05">Client Service: 44 20 7772 5454<br/>Sebastien Hay</p> <p style="position:absolute;top:183px;left:108px;white-space:nowrap" class="ft02">Senior Vice President/Manager</p> <p style="position:absolute;top:202px;left:108px;white-space:nowrap" class="ft02">Sub-Sovereign Group</p> <p style="position:absolute;top:222px;left:108px;white-space:nowrap" class="ft02">Moody's Investors Service Espana, S.A.</p> <p style="position:absolute;top:241px;left:108px;white-space:nowrap" class="ft02">JOURNALISTS: 44 20 7772 5456</p> <p style="position:absolute;top:261px;left:108px;white-space:nowrap" class="ft05">Client Service: 44 20 7772 5454<br/>Releasing Office:</p> <p style="position:absolute;top:311px;left:108px;white-space:nowrap" class="ft02">Moody's Investors Service Espana, S.A.</p> <p style="position:absolute;top:330px;left:108px;white-space:nowrap" class="ft02">Calle Principe de Vergara, 131, 6 Planta</p> <p style="position:absolute;top:350px;left:108px;white-space:nowrap" class="ft02">Madrid, 28002</p> <p style="position:absolute;top:369px;left:108px;white-space:nowrap" class="ft02">Spain</p> <p style="position:absolute;top:389px;left:108px;white-space:nowrap" class="ft02">JOURNALISTS: 44 20 7772 5456</p> <p style="position:absolute;top:408px;left:108px;white-space:nowrap" class="ft02">Client Service: 44 20 7772 5454</p> <p style="position:absolute;top:498px;left:108px;white-space:nowrap" class="ft02">© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their</p> <p style="position:absolute;top:517px;left:108px;white-space:nowrap" class="ft07">licensors and affiliates (collectively, “MOODY’S”). 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However, MOODY’S is not an auditor and cannot</p> <p style="position:absolute;top:553px;left:108px;white-space:nowrap" class="ft02">in every instance independently verify or validate information received in the rating process or in</p> <p style="position:absolute;top:573px;left:108px;white-space:nowrap" class="ft08">preparing its Publications.<br/>To the extent permitted by law, MOODY’S and its directors, officers, employees, agents,</p> <p style="position:absolute;top:615px;left:108px;white-space:nowrap" class="ft02">representatives, licensors and suppliers disclaim liability to any person or entity for any indirect,</p> <p style="position:absolute;top:635px;left:108px;white-space:nowrap" class="ft02">special, consequential, or incidental losses or damages whatsoever arising from or in connection</p> <p style="position:absolute;top:654px;left:108px;white-space:nowrap" class="ft02">with the information contained herein or the use of or inability to use any such information, even if</p> <p style="position:absolute;top:674px;left:108px;white-space:nowrap" class="ft02">MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers</p> <p style="position:absolute;top:693px;left:108px;white-space:nowrap" class="ft02">is advised in advance of the possibility of such losses or damages, including but not limited to:</p> <p style="position:absolute;top:713px;left:108px;white-space:nowrap" class="ft02">(a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant</p> <p style="position:absolute;top:732px;left:108px;white-space:nowrap" class="ft08">financial instrument is not the subject of a particular credit rating assigned by MOODY’S.<br/>To the extent permitted by law, MOODY’S and its directors, officers, employees, agents,</p> <p style="position:absolute;top:775px;left:108px;white-space:nowrap" class="ft02">representatives, licensors and suppliers disclaim liability for any direct or compensatory losses</p> <p style="position:absolute;top:794px;left:108px;white-space:nowrap" class="ft02">or damages caused to any person or entity, including but not limited to by any negligence (but</p> <p style="position:absolute;top:814px;left:108px;white-space:nowrap" class="ft02">excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt,</p> <p style="position:absolute;top:833px;left:108px;white-space:nowrap" class="ft02">by law cannot be excluded) on the part of, or any contingency within or beyond the control of,</p> <p style="position:absolute;top:853px;left:108px;white-space:nowrap" class="ft02">MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers,</p> <p style="position:absolute;top:872px;left:108px;white-space:nowrap" class="ft02">arising from or in connection with the information contained herein or the use of or inability to use</p> <p style="position:absolute;top:892px;left:108px;white-space:nowrap" class="ft08">any such information.<br/>NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS,</p> <p style="position:absolute;top:934px;left:108px;white-space:nowrap" class="ft02">COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF</p> <p style="position:absolute;top:954px;left:108px;white-space:nowrap" class="ft02">ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE</p> <p style="position:absolute;top:973px;left:108px;white-space:nowrap" class="ft08">BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.<br/>Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s</p> <p style="position:absolute;top:1016px;left:108px;white-space:nowrap" class="ft02">Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and</p> <p style="position:absolute;top:1035px;left:108px;white-space:nowrap" class="ft02">municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s</p> </div> <!-- Page 4 --> <style type="text/css"> <!-- p {margin: 0; padding: 0;}--> </style> <div id="page4-div" style="position:relative;width:918px;height:1188px;"> <img width="918" height="1188" src="http://mco.acquiremedia.com/images/PBC_1258661004.png" alt="background image"/> <p style="position:absolute;top:114px;left:108px;white-space:nowrap" class="ft02">Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s</p> <p style="position:absolute;top:133px;left:108px;white-space:nowrap" class="ft02">Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from</p> <p style="position:absolute;top:153px;left:108px;white-space:nowrap" class="ft02">$1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies</p> <p style="position:absolute;top:172px;left:108px;white-space:nowrap" class="ft02">and procedures to address the independence of Moody’s Investors Service credit ratings and credit</p> <p style="position:absolute;top:192px;left:108px;white-space:nowrap" class="ft02">rating processes. Information regarding certain affiliations that may exist between directors of MCO</p> <p style="position:absolute;top:211px;left:108px;white-space:nowrap" class="ft02">and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and</p> <p style="position:absolute;top:231px;left:108px;white-space:nowrap" class="ft02">have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted</p> <p style="position:absolute;top:250px;left:108px;white-space:nowrap" class="ft02">annually at&#160;</p> <p style="position:absolute;top:250px;left:188px;white-space:nowrap" class="ft04">www.moodys.com</p> <p style="position:absolute;top:250px;left:315px;white-space:nowrap" class="ft02">&#160;under the heading “Investor Relations — Corporate Governance —</p> <p style="position:absolute;top:270px;left:108px;white-space:nowrap" class="ft08">Director and Shareholder Affiliation Policy.”<br/>Additional terms for Australia only: Any publication into Australia of this document is pursuant to the</p> <p style="position:absolute;top:312px;left:108px;white-space:nowrap" class="ft02">Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited</p> <p style="position:absolute;top:332px;left:108px;white-space:nowrap" class="ft02">ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136</p> <p style="position:absolute;top:351px;left:108px;white-space:nowrap" class="ft02">972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale</p> <p style="position:absolute;top:371px;left:108px;white-space:nowrap" class="ft02">clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access</p> <p style="position:absolute;top:390px;left:108px;white-space:nowrap" class="ft02">this document from within Australia, you represent to MOODY’S that you are, or are accessing</p> <p style="position:absolute;top:410px;left:108px;white-space:nowrap" class="ft02">the document as a representative of, a “wholesale client” and that neither you nor the entity you</p> <p style="position:absolute;top:429px;left:108px;white-space:nowrap" class="ft02">represent will directly or indirectly disseminate this document or its contents to “retail clients” within</p> <p style="position:absolute;top:449px;left:108px;white-space:nowrap" class="ft02">the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as</p> <p style="position:absolute;top:468px;left:108px;white-space:nowrap" class="ft02">to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or</p> <p style="position:absolute;top:488px;left:108px;white-space:nowrap" class="ft08">any form of security that is available to retail investors.<br/>Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency</p> <p style="position:absolute;top:530px;left:108px;white-space:nowrap" class="ft02">subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc.,</p> <p style="position:absolute;top:550px;left:108px;white-space:nowrap" class="ft02">a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating</p> <p style="position:absolute;top:569px;left:108px;white-space:nowrap" class="ft02">agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization</p> <p style="position:absolute;top:589px;left:108px;white-space:nowrap" class="ft02">(“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-</p> <p style="position:absolute;top:608px;left:108px;white-space:nowrap" class="ft02">NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated</p> <p style="position:absolute;top:628px;left:108px;white-space:nowrap" class="ft02">obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit</p> <p style="position:absolute;top:647px;left:108px;white-space:nowrap" class="ft02">rating agencies registered with the Japan Financial Services Agency and their registration numbers</p> <p style="position:absolute;top:667px;left:108px;white-space:nowrap" class="ft08">are FSA Commissioner (Ratings) No. 2 and 3 respectively.<br/>MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including</p> <p style="position:absolute;top:709px;left:108px;white-space:nowrap" class="ft02">corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated</p> <p style="position:absolute;top:729px;left:108px;white-space:nowrap" class="ft02">by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to</p> <p style="position:absolute;top:748px;left:108px;white-space:nowrap" class="ft02">MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging</p> <p style="position:absolute;top:768px;left:108px;white-space:nowrap" class="ft08">from JPY125,000 to approximately JPY550,000,000.<br/>MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory</p> <p style="position:absolute;top:810px;left:108px;white-space:nowrap" class="ft02">requirements.</p> </div> </body> </html>