Saturday , September 25 2021

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



It went from B + to B

Standard & Poors said it was an "erosion of Argentina's debt profile and inflation dynamics" because of the economic downturns

The Standard & Poors International Office on Monday reduced the credit rating of Argentina in foreign and local currency to B from B + and warned that it could diminish if the government did not continue the adjustment and "unexpected negative political events" further injure investors' confidence.

In terms of forecasts, the company estimated that GDP will contract 2.5% this year and almost 1% in 2019 before recovering modestly by 2020.

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

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

"There has been an erosion of Argentina's debt profile, the path of economic growth and inflation dynamics following the adversities in the implementation of its challenging economic adjustment program, "said the company.

In his report, he explained: "We downgraded our long-term government bonds of Argentina in foreign currency and local currency to B from B + and confirmed our short-term exchange rates and local exchange rates of B".

"Prospects for long-term valuations are stable based on our expectation that the government will implement fiscal, monetary and other measures to stabilize the economy over the next 18 months," he said.

S & P warning

"We can lower the ratings again in the next 12 months of unexpected negative political events or the irregular implementation of the government's economic tightening program damaging confidence of investors, worsening government's access to market funding and potentially squeezing the currency, which would affect inflation dynamics, "warned the company.

Despite the warnings, the rating agency assessed that "the combination of lower funding needs, lower inflation and interest rates, and expectations of continuity in key economic policies after the national elections in October 2019, may lay the foundation for economic recovery and contain external vulnerability. "

"Perceptions that the government's commitment to the economic adjustment program could fall after the national elections in 2019 would create a similar unfavorable market dynamism, which could lead to high interest rates for a long time," he said.

He explained that "the resulting deterioration of the state's financial profile and the availability of liquidity to refinance debt maturities can lead to a lower rating."

"We can raise ratings for the next two years if the successful implementation of policies leads to a faster than expected decline in inflation, to higher exchange rate stability and to a recession less deep than expected, "he pointed out.

He felt that "the expectation of continuity in economic policy after the 2019 elections could reverse the recent deterioration of Argentina's financial, monetary and debt profile and improve its prospects for long-term GDP growth."

Another thumb down

Last week, it was the rating agency Fitch which gave a negative picture of the country's financial situation. On Wednesday it became known that its outlook for Argentina's sovereign debt assessment "down" to "negative", because of the "intense economic instability" that the country suffered.

According to the agency, the intense macroeconomic instability 2018, marked by a major depreciation of peso, dramatically weakened the prospect of growth in the short term. "

In May, Fitch downgraded 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 47% inflation in 2018 and 27.5% in 2019. Just two months ago, in September, forecast a fall of 2.5% of GDP for this year, with an inflation rate of 40%.

However, the Agency considered that the government could meet its goal of reducing the primary budget deficit.

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