The international agency Fitch confirmed his rating “BBB” for the sovereign debt of the Uruguayafter ensuring in a recent report that its default rating as a long-term issuer in foreign currency and local currency presents a “stable” outlook.
According to the risk rating agency, the reaffirmation of the rating is supported by a “relatively high” gross domestic product (GDP) per capita, as well as “solid governance indicators” and “solid external finances.”
However, they emphasize that this assessment is “limited” due to “weak medium-term economic growth prospects”, in parallel to some “competitiveness challenges”, an amount of public debt “sensitive” to movements in the exchange rate exchange rate and a long history with high inflation.
On the other hand, Fitch expects GDP growth to be 3.2% in 2024, signifying a recovery from the meager increase accumulated last year, which was 0.4%. It is especially motivated by the recovery of the economy after the historic drought that devastated the countryside during part of 2022 and all of 2023.
Likewise, it is highlighted that the inflation decreased to 3.68% in April, this being the lowest level in almost 19 years and the eleventh consecutive month within the target range (3%-6%) of the Central Bank of Uruguay (BCU).
In matters of fiscal deficitit is expected to have a slight variation from 3.3% accumulated in 2023 to 3.2% by the end of the current year and to remain at similar levels at least until 2025.
Despite the election year, Fitch understands that “it is unlikely” that there will be a “radical change” in the country’s public policies if the opposition triumphs. In that sense, he is encouraged to anticipate that the plebiscite promoted by the PIT-CNT will not reach the votes necessary for its approval.
Evolution of public debt in Uruguay
In another order, it is maintained that public debt increased to 63.5% at the end of 2023 from 59.1% in 2022, remaining above the BBB median of 55%.
In that sense, a “moderate” increase in the debt ratio is expected during the last years of the forecast horizon, something that reflects also moderate economic growth in the medium term.
Source: Ambito
