LONDON (Reuters) – Defaults by weaker emerging market companies will rise in 2020 and 2021 as the effect of the COVID-19 pandemic hampers business activity, Moody’s forecast on Thursday.

The ratings agency said the trailing 12-month speculative-grade default rate for emerging market firms would rise to between 7.8% and 11.2% by the end of 2020, from the low level of 2.2% in March.

The rate will then rise further by March 2021 to the 8.3% to 13.7% range, it forecast.

“The global spread of the coronavirus has led to business closures and restrictions on social interactions in many countries,” Moody’s said in a report.

“The collapse in domestic aggregate demand and export demand has weakened EM (emerging market) corporate profitability and liquidity.”

Many low-rated emerging market governments were poorly prepared to deal with a large public health crisis and had limited fiscal and monetary capacity to stimulate their economies, it said.

Depressed oil prices will likely persist during the year, adding another strain to exporters of the commodity, it added.

(Reporting by Tom Arnold; Editing by Mark Potter)