Moody’s Ratings shared his perspectives on the main variables that local and international investors monitor, including fiscal deficit, economic activity and inflation. In this context, the risk rating agency projected a 3% growth for the country, positioning it as one of the best performing economies since the pandemic, although warned about the situation of international reserves.
According to Moody’s, in relation to Argentine debt, the rating agency highlighted that the implementation of policies aimed at reducing liquidity risks and large macroeconomic imbalances “would make a significant difference between sovereign countries with low ratings, those that are located in the Caa category or that have managed to overcome it.” In this sense, they reaffirmed the country’s Ca stable rating, although they dedicated a fragment to highlight the macroeconomic improvements carried out by Javier Milei. Among them, the primary surplus and the brake on inflation stand out.
“The macroeconomic imbalances inherited by the previous government were significantly high, so their correction will take time,” Moody’s anticipated. However, regarding exchange rate policy, he noted that, although the gap between the official and parallel exchange rates was reduced, “limited reserves remain a crucial constraint to ensure debt repayment during 2025-2026”. For this reason, despite the improvement in the local debt rating, a latent risk persists.
GDP and economic activity: the numbers that Moody’s predicts for Argentina
Regarding fiscal balance, Moody’s projects a fiscal deficit of 1% of GDP in 2025 and the gap between the primary debt-stabilizing balance and the primary balance is 34 pp.
Finally, it highlights that Argentina, Brazil and Uruguay, “will be among the economies that will perform better than their pre-pandemic trend, and Argentina will show substantial improvement after the contraction of activity during 2023-2024.”
The general outlook for Latin America and the Caribbean
-Regulatory institutions will continue to support credit profiles. Our overall assessment of institutional quality in Latin America is relatively low, reflecting weak control of corruption and the rule of law. However, for Baa-rated sovereigns, checks and balances will continue to prevent most radical policy changes, with institutional policy arrangements allowing authorities to manage local and external shocks. Recent reforms will bring financial benefits to Ba-rated governments, but further progress would be needed to strengthen sovereign profiles. For governments rated Caa, persistent liquidity pressures and large macroeconomic imbalances will remain the main credit constraints.
-Fiscal space is limited despite the stabilization of public debt indicators. Fiscal consolidation efforts will help stabilize the debt burden across the region. Still, debt affordability will remain a constraint as interest-to-income ratios will outpace peers due to low incomes and high borrowing costs. Spending rigidities reflecting rising mandatory spending and high interest burdens will limit governments’ ability to respond to persistent social demands and climate risks.
-The dynamics of investment is key to achieving sustained growth. With a median growth rate of 3.0% in 2025, most countries will grow at rates similar to those seen last year. The evolution of investment with respect to gross domestic product (GDP), which tends to be lower than in other emerging regions, will differentiate the growth dynamics between countries in the coming years.
-Upcoming policy changes in the US will increase uncertainty. The region will face potentially disruptive changes in trade and immigration policies, the geopolitical dynamics between the US and China and the volatility of financial markets as Donald Trump begins his second term as US president. The economies of Mexico and Central America are expected to be more exposed to possible trade tariffs and changes in immigration policies
-Factors that could change the perspective. There could be negative pressures generated by worsening financial conditions that contribute to a further deterioration in debt affordability and reduce fiscal space, or by political flare-ups or rising social tensions that limit the momentum of reforms. Policies that address structural constraints on growth and investment would be credit positive.
Source: Ambito
