Costa Rica: Ratings Agencies Insist on Fiscal Adjustment

Fitch, Moody's and Standard & Poor's are once again warning of the need to generate more revenue and cut public spending in order to avoid "negative consequences for ratings."

Tuesday, April 7, 2015

On average agencies provide a period of 12-18 months for the fiscal deficit and public debt to stabilize, while clarifying that "... the presentation of tax reforms is not enough to ensure a good perspective for the country. " The ratings by the agencies are a guide especially for those making foreign direct investments. reports that "... US agencies agreed that with changes in taxation, they must send clear signals regarding the reduction of public spending. " Given this, César Barceinas, analyst at Standard & Poor's added that "... Public spending controls help. In 2014 adjustments were made and the fiscal deficit was below expectations, but it is still high and [those efforts] will not entirely solve the problems. We need more revenue. "

Meanwhile, Fernando Rodriguez, vice minister of Finance at the Treasury, added that "... The country has less and less time to face its fiscal difficulties. If we lower the rating it would be a terrible signal that the country would be sending out."

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More on this topic

New Warning to Costa Rica

November 2018

Fitch Ratings reported that the country is under observation and for now maintains the rating at BB, awaiting what happens with the fiscal reform and the payment of government debt at the end of the year.

Fitch Ratings, a U.S. risk rating agency, reported on November 15th that Costa Rica would be close to a sovereign rating downgrade because of the country's public finances situation.

Growing Concern Over High Fiscal Deficit

July 2018

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%.

Standard & Poor's Affirms Costa Rica's Ratings

February 2015

The agency has maintained the rating for sovereign bonds at "BB" but warned of the risks to which the economy is exposed if not a tax reform does not take shape.

From a statement issued by Standard & Poor's:

Standard & Poor 's Ratings Services has affirmed its' BB / B' rating on long- and short-term foreign and local currency sovereign bonds of the Republic of Costa Rica.

Investment Risk Grade in Costa Rica

April 2014

According to Moody's, the country's credit rating does not reflect the current conditions of the economy, highlighting in particular the unsustainability of the fiscal deficit.

Costa Rica is running out of time to solve its high public spending problems and stop the budget deficit from continuing to grow the way it has been doing up until now.