Threats to Risk Rating

Institutional problems and lower levels of economic growth compared to other countries with the same risk rating, could cause in the future a degradation of Guatemala's debt rating.

Tuesday, July 23, 2019

Although in its last evaluation Moody's decided to keep Guatemala's credit rating at Ba1 with a stable outlook, arguing that the economy reports stable growth, and that a prudent management of monetary and fiscal policy has been made, there are some threats for the rating to degrade.

For Gabriel Torres, Moody's analyst, the rating could be downgraded if "... Some of these problems that I mentioned as the institutional part, the level of growth level a little lower than other countries with similar ratings continues, in time could lead to a downgrade."

You may be interested in "Negative Risk Outlook for Guatemala"

Although there are threats to the change of rating, there are factors contributing to keep the grade unchanged. Torres explained to Prensalibre that "... if debt went down and remained lower on a quasi-permanent basis, that could support. But right now, we don't see a change in rating."

For the risk qualifier, other arguments influencing the stable outlook are the low fiscal deficit because of strict controls on public spending and reduced public debt ratios, as well as a demonstrated economic resilience to extra-economic events.

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More on this topic

Costa Rica: Political and Fiscal Uncertainty Take Its Toll

June 2020

Standard & Poor's downgraded the foreign debt rating from B+ to B with a negative outlook, arguing that there is uncertainty due to the lack of flexibility of the Alvarado administration in implementing fiscal policy in the country.

The negative perspective in the new risk note, anticipates that there is a possibility that in the next 12 months the rating will be degraded again, if the authorities adopt policies that damage the country's financial profile.

Moody's Downgrades Nicaragua

February 2020

Arguing that economic strength has weakened as a result of social tensions and is likely to leave a lasting negative impact, the rating agency reduced the country's credit risk rating from B2 to B3.

"The risk of reduced access to official external credit is creating financing challenges and restricting the authorities' ability to support economic activity," the agency's report explains.

Nicaragua: Risk Rating Continues So Far

November 2019

Standard & Poor's warned that if in the coming months the political environment worsens or access to local and external financing deteriorates again, the debt note could suffer further deterioration.

In November 2018, the agency reduced from B to B the rating of Nicaragua's foreign currency debt with a negative outlook, arguing that the country's fiscal and financial profiles have weakened at that time.

Guatemalan Debt Rating Confirmed

June 2018

Citing a long history of fiscal and monetary policy characterized by prudent management, the rating agency Moody's maintained the country's credit risk rating in Ba1.

From a statement issued by the Bank of Guatemala:

June 2018. Moody's Investors Service maintains the credit risk rating for Guatemala at Ba1 with a stable outlook.  

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