Negative Outlook for Salvadoran Debt Rating

Standard & Poor's placed has set El Salvador’s risk rating as ‘negative outlook’, indicating deterioration in the investment climate and growth of the fiscal deficit.

Thursday, January 3, 2013

Last Friday Standard & Poor's Ratings (S & P) cut its forecast for El Salvador, arguing that the climate of increasing political polarization is weighing on investment and economic growth.

S & P set the rating for the Central American country at BB-, three levels above junk bonds, lowering the outlook from stable to negative.

"The revision to the outlook reflects the risk of a future downgrade if political polarization continues to weigh on investment and growth in gross domestic product (GDP), resulting in a greater burden of fiscal and external debt", said the S & P analyst Joydeep Mukherji.

The ratings firm expects that El Salvador’s GDP growth per capita will grow by 1% or less in 2013, and said the poor economic growth could hamper efforts to reduce the fiscal deficit, and lead to an increased burden of debt. S & P also noted the limited monetary and fiscal flexibility.

Another ratings agency, Moody 's Investors, reduced the sovereign credit rating last month to Ba3 for El Salvador, the current rating equivalent S & P, noting the weak economic growth and slowing investment.

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More on this topic

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In the view of Moody's, Fitch and S & P, the latest projections of public debt and fiscal deficit by the Central Bank of Costa Rica, further worsen the outlook for the debt rating.

Last week the Central Bank of Costa Rica (BCCR) released a report in which it explained that for this year it is expected that the public debt with respect to the Gross Domestic Product (GDP) will reach 53.8%, and by 2019 this indicator will reach 58.4%.

Guatemala's Sovereign Risk Rating Revised

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S & P Also Rates Honduras as Negative Outlook

March 2013

Standard & Poor's has revised its outlook on the long-term sovereign rating of Honduras, from stable to negative due to the risk of continued deterioration of macroeconomic stability.

From a statement from Standard & Poor's Ratings Services:

Standard & Poor's has revised the outlook to negative for Honduras because of its larger fiscal deficits

Fitch Lowers Rating Outlook for El Salvador

July 2012

Fitch Ratings has downgraded the economic perspective of the rating, making it negative outlook BB.

From the press release by Fitch Ratings:

Fitch Ratings - New York - July 24, 2012: Fitch Ratings affirms its ratings for El Salvador as follows:
- Long-Term Ratings (IDR) in foreign currency and local currency 'BB';

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