Moodys upgrades Perus rating to A3 from Baa2 Lima, Jul. 03. Moodys Investors Service announced it has raised Perus sovereign rating to A3 from Baa2, driven by continued strengthening of the governments balance sheet and optimism over structural reforms to increase productivity. According to the report issued by the credit rating agency, Peru’s new rating upgraded two steps to A3 from Baa2, a category reached by solid economies that are susceptible to economic changes. Likewise, according to the information published by Moody’s, the outlook on the Andean nation’s rating was changed to stable from positive. In addition, the fiscal balance remained in surplus in 2013, coming to 0.7% of GDP, and the public debt ratio declined to 19.6% of GDP from 20.4% in 2012. Sustained fiscal surpluses have generated substantial liquid assets, driving the sovereigns public debt net of liquid assets to below 4% of GDP. A driver underpinning the upgrade is the continuing momentum for structural reform, since important amendments have been legislated to increase productivity and support Perus comparatively high growth rates. President Humala’s administration has adopted measures to decrease transaction costs and fees, and there have also been education, healthcare and tax reforms. In addition to these structural changes, Peru’s economy is expected to grow by about 5.5 percent this year, according to official forecasts. As a result of these reforms, Moody’s expects that GDP growth in Peru will accelerate to around 6% in 2015 and 2016 from a bit over 5% in 2014, underpinning a sustained improvement in credit metrics relative to similarly-rated peers. Although upward pressure on the sovereigns rating is unlikely over the medium term, a significant strengthening of governance indicators, especially related to political institutions, would contribute to improving creditworthiness. On the contrary, downward pressure on the rating would develop if the countrys external finances deteriorate significantly, or if political noise increases significantly.
Posted on: Fri, 04 Jul 2014 05:25:21 +0000
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