Moody's Foresees Drop in El Salvador's Risk Rating

Low economic growth, a poor fiscal situation, and high exposure to external shocks, are the conditions that could lead to a drop in the sovereign rating to speculative grade level.

Tuesday, March 12, 2013

Framed in a report entitled "The strong get stronger and the weak weaker," which analyzes the prospects of sovereign risk in the countries of Latin America and the Caribbean, the chapter on El Salvador indicates a high chance that the rating agency will lower the country's credit rating to B1. reports that "this year, Moody's Investors Service foresees a new drop in the risk rating of El Salvador, because of low economic growth, the country's fiscal situation and high exposure to external shocks, especially those coming from the United States. "

"In November last year, Moody's downgraded Salvadoran bonds from "Ba2" to "Ba3", indicating a significant credit risk. If there is a new drop, the country could sink into the "speculative" or "junk bonds" grade because it would be classified at a grade "B1", which means a high credit risk and poor credit quality in general."

"Low economic growth, reiterated the agency, is one of the reasons for their perspective. Moody's expects the country's economy to grow by 2% this year, and calculates that in 2012 it grew by 1.3%. This means that this year it would only report an improvement of 0.7% ... ".

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