It goes from B + to B
Standard & Poor's said there was "an erosion of the profile of Argentine debt and the dynamics of inflation" due to the deterioration of the economic program
The International Standard & Poor's agency on Monday reduced Argentina's credit rating in foreign and local currencies to B from B + and warned that it could reduce if the government did not resume adjustments and if "unexpected negative political events" further undermined investor confidence.
As for projections, the company estimates that GDP will contract 2.5% this year and almost 1% in 2019, before recovering moderately in 2020.
"The possibility of inflation will be around 44% and can only gradually decrease to 25% by 2019," the rating agency projects.
He estimates that the general government net debt exceeds 80% of GDP this year, from 50% in 2017.
"There has been an erosion of the profile of Argentine debt, the path of economic growth and the dynamics of inflation "after a setback in the implementation of a challenging economic adjustment program," the company said.
In his report, he explained: "We lowered our Argentine long-term rating in foreign currencies and local currency to B from B + and confirmed our short-term foreign currency and our local currency rating B".
"The outlook for a long-term rating is stable based on our expectations that the government will implement fiscal, monetary and other measures to stabilize the economy for the next 18 months," he said.
S & P Warning
"We can lower ratings again over the next 12 months if unexpected negative political events or the implementation of an irregular government economic austerity program undermine confidence investors, exacerbate government access to market financing and potentially suppress the currency, which will affect the dynamics of inflation, "the company warned.
Despite warnings, the rating agency estimates that "a combination of lower financing needs, lower inflation and interest rates and the expectation of continuity in key economic policies after the October 2019 national election, can lay the foundation for economic recovery and contain external vulnerabilities. "
"The perception that sovereignty commitments to economic adjustment programs can be cut off after the 2019 national election will create unfavorable market dynamics, which can lead to high interest rates for a long time," he said.
He pointed out that "the damage to the country's financial profile and its access to liquidity to refinance debt maturity can lead to lower ratings."
"We can raise the rating in the next two years if successful policy implementation leads to a decline in inflation faster than expected"for greater exchange rate stability and a recession that is less than expected," he said.
He considered that "hopes of continuity in economic policy after the 2019 election could reverse the deteriorating profile of Argentina's fiscal, monetary and debt, and increase the prospect of long-term GDP growth".
Other thumbs down
Last week, it was the rating agency Fitch that gave a negative view of the country's financial situation. On Wednesday, it was found that the prospects for Argentina's government debt rating "dropped" to "negative", because of the "strong economic instability" suffered by the country.
According to the agency, "intense macroeconomic instability in 2018, marked by a large depreciation of the peso, has dramatically weakened the growth prospects in the short term."
Last May, Fitch downgraded Argentina's debt from "positive" to "stable". The company also estimates that Argentina's economic activity will decline 2.7% this year and 1.7% in 2019.
It also projects inflation of 47% in 2018 and 27.5% in 2019. Only two months ago, in September, it has projected a decline of 2.5% of GDP for this year, with 40% inflation.
However, the agency considers that the Government can fulfill its objectives to reduce the primary fiscal deficit.
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