Outbreaks of social unrest pose challenges to both economic growth and government finances, according to Moody’s Investors Service.

Following a week of widespread protests across the U.S., the rating agency said that the explosion of social tensions revealed long-standing social risks for governments, particularly states and governments of major cities.

“Anger about police brutality and institutional racism has led to protests, in some cases accompanied by looting, in as many as 140 cities,” it noted.

These disruptions come as state and local governments are facing the effects of a sharp economic downturn, a spike in unemployment and “a fast and severe decline” in tax revenue, coupled with increased health costs, Moody’s said.

“With governments facing weak overall economic conditions and austere budget realities for at least the next two years because of the negative effects of coronavirus, underlying inequality and other social weaknesses represent an additional source of credit risk,” it said.

Moody’s also warned that if these factors are not addressed, “these weaknesses will hamper economic growth” and strain government budgets.

“The immediate credit effects of the unrest are an increase in public safety spending and further loss of tax revenue caused by disruptions in economic activity and the destruction of property,” it noted.

“Longer-term credit effects will depend on whether the unrest is isolated or similar disruptions become a recurring problem,” Moody’s said, “and whether governments adopt policy solutions to address and improve the underlying social trends.”

Moody’s added that solutions will likely take years to implement, and could be expensive.