Fitch downgraded Laos' long- and short-term issuer default ratings to CCC/C from B-/B, saying the country faces "deepening liquidity pressures" due to the coronavirus crisis and its sizable debt maturities.

The rating agency said Laos' debt-servicing ability has weakened amid narrowing funding options, low foreign-exchange buffers and a widening fiscal deficit that could raise financing needs in the near term.

"Financing for Laos to meet its obligations during the remainder of 2020 appears adequate, but a large external financing gap remains for next year," Fitch said, noting that the country has $1.1 billion in external debt coming due every year from 2021 through 2024, while its foreign-exchange reserves just stand at $1.3 billion.

Fitch expects the country's gross foreign-exchange reserves to fall to $1.2 billion by the end of 2020 and hit below $1 billion in 2021 due to external debt repayments and foreign-exchange intervention by the central bank.

"Fitch views reserve adequacy as insufficient in the context of the country's managed currency regime, large import bill and external debt-servicing requirements," the rating agency said.

Laos' fiscal deficit is projected to climb to about 7% of GDP in 2020 from 3.2% in 2019, according to Fitch, as government revenue declines by an estimated 25% due to fiscal measures deployed in response to the pandemic. The deficit is expected to shrink to 5.4% of GDP in 2021 due to a recovery in government revenue and economic activity.

Real GDP growth is forecast to slow to 0.5% in 2020 from 5.5% in 2019 as the tourism sector takes hit from border restrictions, domestic lockdown measures and the global recession. Growth is projected to rebound to 5.5% in 2021 and 6% in 2022.