Fitch Ratings, one of the world's top credit rating agencies, downgraded the Maldives' long-term foreign and local currency issuer default ratings (IDRs) to 'B' from 'B+', and revised the archipelago’s credit outlook from 'Stable' to 'Negative'.
The Hong Kong-based agency expects Maldives' economy to suffer as a result its dependency on the tourism sector.
"A deep recession seems unavoidable, as tourism directly accounts for about 25 percent of Gross Domestic Product (GDP), according to national accounts data, and even more indirectly".
"Our forecast of a 5 percent contraction in economic activity in 2020 and a rebound to 10 percent growth in 2021 are subject to significant uncertainty", said the agency.
Further, Fitch noted the potential increase of government debt from 60 percent of the GDP in 2019, to 73 percent of the GDP in 2020.
"We expect the fiscal deficit to widen to 12 per cent of GDP in 2020 from 5.7 percent in 2019".
Fitch attributed the negative outlook given the Maldives' limited external buffers".
Previously, Fitch stated that Maldives' B+ rating reflected the country's potential Gross Domestic Product (GDP) growth prospects, the tourism industry's strong revenue generation capacity, and favourable structural indicators to balance the government's debt and reserves position.
The first credit ratings agency to rank Maldives was Moody's Investors Service, which rated the Maldives at a B2 with a negative outlook in 2016.