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As the global economy recovers, corporate credit rating upgrades are outpacing downgrades this year, Fitch Ratings reports.

In a research note, the rating agency said that credit conditions are improving, with ratings upgrades among global corporate issuers exceeding downgrades in the first seven months of 2021.

Last year, public health restrictions resulted in almost 20% of corporate ratings receiving a downgrade, with 7% of issuers suffering a multiple-notch downgrade, Fitch said.

This year, as pandemic-related restrictions have relaxed and economies have rebounded, “the most severe credit pressures have abated and the number of positive ratings actions has started to rise,” it said.

As a result, upgrades have outnumbered downgrades for the first time since 2017, it noted.

While the highest number of corporate downgrades in 20 years occurred in 2020, only 22% of the upgrades this year represent reversals of last year’s record downgrade activity.

Instead, Fitch said that “most rating improvements have been driven by issuers’ resilient financial performance during the pandemic or their more conservative approach to funding.”

Developed markets are leading the positive rating action, while upgrade/downgrade activity has been close to even in emerging markets, Fitch noted.

The sectors leading the way include building materials, health care and energy.

“Natural resources and commodity sectors, including oil and gas companies, have benefited from healthy commodity prices that recovered quickly after the initial shock at the start of the pandemic,” Fitch said.

“The increase in working from home has spurred the need for house extensions and renovations, supporting demand for building materials.”