The rating agency decided to maintain at "B" the long-term and short-term local and foreign currency sovereign credit rating, with a negative outlook indicating the risk of a downgrade in case the Assembly does not approve an Extended Fund Facility or other policy measures.
In the current scenario, covering the government's large financing needs may require resorting to the central bank or other non-conventional financing, highlights the rating agency's analysis.
Moody's maintained the Salvadoran government's long-term and senior unsecured issuer rating at B3, but decided to change the outlook to negative, a downgrade that reflects persistent concerns about public debt sustainability.
The negative outlook reflects the credit risks associated with the implementation risks of its upcoming fiscal adjustment efforts, high liquidity risks driven by large gross financing needs in 2021-23, and persistent concerns about debt sustainability despite an expected fiscal adjustment, the rating agency explained.
Arguing that the pandemic has had a negative effect on the local economy and Panamanian public finances, Fitch Ratings downgraded the country's sovereign rating from BBB to BBB-.
Regarding forecasts for 2021, the rating agency expects Panama to experience an economic recovery with a real growth of 9.2%, driven by the economic opening, public investment projects such as the construction of Metro Line 3, exports from the copper mine, and the recovery of domestic consumption. This growth trend is expected to be maintained by 2022, informed the Ministry of Economy and Finance of Panama (MEF).
Arguing that due to the pandemic the current revenues of the General Government have been significantly reduced, Standard and Poor's downgraded Panama's sovereign rating from BBB+ to BBB.
The increase in total debt interest payments as a proportion of the General Government's current revenues is another factor that the rating agency considered when lowering Panama's rating.
Based on the argument that there is no significant fiscal consolidation and sustained economic recovery, the rating agency decided to downgrade the government's long-term issuer rating perspective from stable to negative.
Although the outlook was modified, Moody's decided to maintain the long-term issuer and senior unsecured debt ratings at Baa1.
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.
The rating agency decided to keep the long-term issuer's note at B2, but changed the risk outlook from stable to negative, arguing that there are greater risks to the country's financing due to increased borrowing requirements.
The affirmation of Costa Rica's B2 rating takes into account the sovereign's levels of wealth above its peers and its dynamic economy.
Arguing that a lower economic growth and a higher fiscal deficit are expected due to the effects of the covid-19, the agency decided to modify from BB to BB- the country risk rating.
The situation of the tax burden in the country is another factor affecting Fitch's decision, which was communicated to the Banco de Guatemala through the preliminary bulletin that the agency sent to the authorities.
For Moody's, the Costa Rican government's response to the Covid-19 crisis will put negative pressure on the country's fiscal profile.
According to the rating agency's analysis, the measures include a three-month moratorium on tax payments, a gradual reduction in corporate social benefit contributions and extended credit lines for the companies most affected by the economic recession.
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.
The rating agency maintained BBB's long-term issuer default rating, but decided to change the risk outlook from stable to negative, arguing that the debt burden will continue to increase in 2020.
KEY RATING DRIVERS
The revision of Panama's Outlook to Negative reflects a marked deterioration in fiscal deficits and a significant increase of the government's debt burden, related to accumulation of arrears by previous administration and higher fiscal deficit targets under the modified Fiscal Responsibility Law. In addition, the recent greater-than-anticipated growth deceleration creates additional challenges for fiscal consolidation.
Arguing that continuity in economic policies is expected after the change of administration in January 2020, Standard & Poor's maintained the country's credit risk rating at BB-.
From S&P report:
S&P Global Ratings confirmed its long-term sovereign credit ratings of "BB-" in long-term foreign currency and "BB" in Guatemala. The outlook for our long-term ratings remains stable.
Fitch Ratings decided to keep the country's risk rating at B, but changed the outlook from negative to stable, arguing that there are some signs of stabilization of Central Bank reserves and commercial bank deposits.
The revision of the outlook reflects the stabilization of central bank reserves and commercial bank deposits, a significant fiscal adjustment and social security reform that have reduced domestic financing needs and a pronounced external rebalancing that has facilitated the external financing requirement, the rating agency reported.
Fitch Ratings kept in B+ with a negative outlook, the sovereign debt rating, arguing that "the weaknesses in public finances are reflected and the political stagnation has prevented the timely approval of reforms that address these problems."
The new fiscal rule has not been approved, and the Congressional authorization requirement for foreign loans periodically restricts Costa Rica's financial flexibility, is another of the risk qualifier's arguments.
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.