The coronavirus pandemic will put pressure on the revenues of regional and local governments

Moody’s Public Sector Europe said in a report that the coronavirus pandemic will put pressure on the revenues of regional and local governments in the Czech Republic, Poland, Hungary, Russia and Turkey in 2020, leading to higher deficits and debt burdens.

The economic contraction caused by the coronavirus shock will translate into falling shared taxes and own-source revenues for RLGs in these five countries.

Their combined funding needs will exceed €25 billion in 2020, up from €21 billion in 2019, before returning to pre-crisis levels in 2021.

Regional and local governments in Turkey and Poland are the most vulnerable to a prolonged crisis due to high debt exposure and modest operating performance, respectively.

Regional and local governments’ debt burdens will increase in all five countries before stabilising in 2021 as revenues pick up, except Turkey.

Turkey, Poland and Hungary will record the highest debt burden increase in 2020.

“Regional and local governments in the Czech Republic, Poland, Hungary, Russia and Turkey will be hit hard by the coronavirus shock in 2020,” said Vladlen Kuznetsov, a Moody’s Vice President – Senior Analyst and co-author of the report. “However, they will be able to weather the shock, given their mix of good fiscal flexibility, low debt burdens, and low refinancing risks.”

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