Costa Rica's ratings are supported by its high per capita income, strong governance indicators, modest external debt burden and improved public finances.
On the other hand, the monetary and exchange rate policy framework represents a key credit weakness, particularly in light of comparatively high levels of inflation and financial dollarization, a relatively large current account deficit, financial sector weaknesses and fragile albeit improved international liquidity.
'Fitch believes that Costa Rica's improved public finances, net external creditor position and broad-based multilateral support could help to mitigate the impact of the U.S. recession and tighter global liquidity on sovereign creditworthiness,' said Casey Reckman, Associate Director in Fitch's Sovereign Group.
Recent fiscal consolidation owing to buoyant economic growth, administrative measures, expenditure discipline and incomplete execution, underpin stronger public finances. Although the fiscal balance will return to negative levels in 2009 as growth slows and authorities try to cushion the blow of external shocks with higher spending, the projected 2.5% of GDP fiscal deficit would not threaten debt dynamics and still compares favorably against the 'BB' median. Costa Rica's general government debt is forecast to ...
Fitch affirmed Costa Rica’s long term risk ratings for foreign and domestic currency: ‘BB’ and ‘BB+’, respectively.
The Outlook on both ratings is Stable. Fitch has also affirmed Costa Rica's short-term foreign currency IDR at 'B' and the Country Ceiling at 'BB+'.
Costa Rica's ratings are supported by its high per capita income; a relatively diverse economy, which traditionally attracts sizeable foreign direct investment (FDI); and its net external creditor position. The ratings are constrained by a narrow fiscal revenue base, a comparatively weak monetary and exchange rate policy framework, and relatively low international liquidity indicators.
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