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As the economic recovery continues to gain traction, the credit environment is stabilizing — but regional differences remain, says Fitch Ratings.

In a new report, the rating agency said that in the first quarter of 2021, the ratio of rating downgrades to upgrades had returned to pre-pandemic levels. Yet, uncertainty remains, with 20% of ratings either carrying a negative outlook or rating watch.

In the short term, Fitch expects to see continued improvement in corporate credit outlooks as vaccine distribution expands and public health restrictions ease.

However, the improvement will vary by region “due to the timing of the pandemic’s spread, sector composition and a gap in economic recovery prospects around the world,” Fitch said.

Indeed, this divergence “will be evident in future corporate rating actions over the remainder of 2021,” Fitch said.

“The receding effects of the coronavirus pandemic will facilitate the reversal of negative rating actions for some issuers, but others facing continued liquidity stress or negative pandemic-related dynamics and remain vulnerable to downgrades.”

For North America, Fitch said that strong economic momentum in the U.S. will support continued improvement in credit conditions.

In emerging markets, a weaker recovery will continue to weigh on the credit outlook. “However, emerging market issuers have demonstrated resilience,” Fitch noted.