Saturday , August 13 2022

The qualifier lowered the note to Argentina's debt and issued sharp warnings


It passed from B + to B

Standard & Poor's said there was "an erosion of the Argentine debt profile and the dynamics of inflation" due to the delay in the economic program

International Standard & Poor's agency downgraded Argentina's credit rating in foreign and local currency to B of B + and warned that this could be reduced if the government does not continue to adjust and if the "unexpected negative political events" further damage investor confidence.

As for the projections, the company estimates that GDP this year will decrease by 2.5%, and almost 1% 2019, before the recovery in 2020 is recovered.

"It is likely that inflation will be about 44% and could gradually fall to 25% in 2019," the rating agency said.

He estimated that the general government's net debt this year exceeds 80% of GDP, from 50% in 2017.

"There was an erosion of Argentina's debt profile, the path of economic growth and the dynamics of inflation after a standstill in the implementation of its challenging economic adjustment program, "the firm said.

In his report, he explained: "We have reduced the long-term sovereign ratings of Argentina in foreign currency and local currency to B of B + and confirmed our short-term foreign currency and local rating B".

"The prospects for long-term ratings are stable based on the expectation that the government will apply fiscal, monetary and other measures to stabilize the economy in the next 18 months," he said.

S & P caution

"We can again reduce ratings over the next 12 months if unexpected negative political events or improper use of government's economic savings program damages trust investors, exacerbating the government's access to market finance and potential pressure on the currency, which would affect the dynamics of inflation, "the company warned.

Despite the warnings, the rating agency estimates this "a combination of the need for smaller financing, lower inflation and interest rates, and the expectation of the continuity of key economic policies after the national elections in October 2019., could lay the foundations for economic recovery and contain external vulnerability. "

"Perceptions that a commitment to the sovereign economic adjustment program could slow down after national elections in 2019 would create a similar unfavorable market dynamics, which could lead to high interest rates for a long time," he said.

He hinted that "the resulting deterioration of the sovereign financial profile and its liquidity approach to refinancing the maturity can lead to a lower rating."

"We can raise the rating in the next two years if successful policy implementation runs faster than the expected fall in inflation, a higher exchange rate stability and a recession that is less profound than what is expected, "he noted.

He believed that "expectations of continuity of economic policies after the 2019 election could reverse the recent deterioration in the fiscal, monetary profile and debt of Argentina, as well as to improve their prospects for long-term GDP growth."

Another thumb down

Last week, the rating agency Fitch gave a negative attitude to the financial situation in the country. On Wednesday it became known that its appearance for the Argentine debt rating was "downgraded" to "negative", due to the "intense economic instability" that the country suffered.

According to the agency, "intensified macroeconomic instability in 2018, marked by a major depression of the peso, has dramatically weakened the growth prospects in the short term."

Last May, Fitch reduced Argentina's debt from "positive" to "stable". The company also estimated that Argentina's economic activity will fall 2.7% this year and 1.7% in 2019.

It also predicted inflation of 47 percent in 2018 and 27.5 percent in 2019. Just two months ago, in September, a 2.5 percent of GDP projected for this year was projected, with an inflation of 40 percent.

However, the agency considered that the government could meet its goal of reducing the primary fiscal deficit.

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