One of the most demanding credit rating agencies raised one point above the minimum Uruguay’s credit note to BBBwith a stable perspective, fitch followed the example of Moody’s and Standard & Poor’s, where all three highlighted a stable outlook.
fitch published a report on Uruguay raising one notch on Uruguay’s long-term foreign currency and local currency rating to ‘BBB’ from ‘BBB-‘highlighting a stable rating outlook.
Among the main reasons are Uruguay’s resilient fiscal performance to absorb the impact of the COVID-19 pandemic, the track record of compliance with its modified tax framework – which improved its fiscal credibility – increased resilience to economic shocks, reduced risk of a possible future sharp increase in the public debt burden, and the recent approval of the social security reform.
What did Moody’s and S&P say?
At the beginning of last month, the rating agency Moody’s improved the outlook for the public debt of the Uruguay from “stable” to “positive“, after seven years where it had gone from “negative to” stable.” For Moody’s, Uruguay’s note was confirmed in “Baa2“, one notch above the investment grade threshold, and an “economic resilience” of “Baa1”.
According to the report, the decision was based on prospects for strong economic growth. The rating agency highlighted successful implementations of fiscal policies and the State’s commitment to the implementation of the fiscal rule, which would underpin a reduction in the public debt burden. The strength of institutions, and of governance, that provided an effective political response to crises and maintained political and social stability.
Standard & Poor’s, for its part, also raised the rating of the sovereign debt of Uruguay from BBB to BBB+, “with stable outlook”, at the beginning of May where he highlighted his “sound fiscal policy”, putting the country two notches above the investment grade minimum. “The recent improvements to the fiscal policy framework of Uruguay, including the probable approval of the social security reformthey should contribute to the stability of public finances in the coming years and limit the increase in the debt burden”, they expressed from S&P.
In addition to the improvements in the fiscal rule and the approval of the pension reform, S&P mentioned other factors to take into account to justify the “stable outlook” that he foresees for Uruguay. “We hope that these policies support fiscal execution, along with a GDP growth supported by a portfolio of diversified investment projectsafter the completion this year of the UPM plant 2 and related to infrastructure this year,” stated the rating agency.
Source: Ambito
