The overall tone of the credit quality remains negative despite several positive indicators of an economic recovery, according to a DBRS commentary published Thursday.

Future downgrade-to-upgrade ratios will be highly weighted to the downgrade side, DBRS forecasts.

“The real economic recovery will be fragile and credit deterioration will continue,” says Peter Bethlenfalvy, co-president, “with rating actions remaining predominately negative through the next 18 months.”

The current downgrade-to-upgrade ratio of 8:1 illustrates the degree of credit deterioration that has occurred in 2009. DBRS expects this ratio to remain elevated despite good recovery prospects in the economy.

“Although there has been a high degree of negative rating action, close to 90% of credits in the DBRS universe did not change,” adds Bethlenfalvy. “This is consistent with the DBRS philosophy of rating through the cycle.”

At the end of July 2009, Negative trends outpaced Positive trends by a ratio of 6:1.

“As market conditions slowly improve, DBRS expects the number of ratings with Negative trends to decrease and the number of ratings with Stable trends to increase,” says Bethlenfalvy, “although some of the Negative trends will translate into downgrades.”