Is it enough for rating agencies to improve our grade?

( From the long list of pending that the country has been dragging on to improve its fiscal situation, the government has already been able to put the “check” on the approval of the agreement with the International Monetary Fund (IMF), momentarily has the checkbox of the primary surplus, and is with the pen ready to take for granted the Public Employment bill if it manages to pass the filter of the Constitutional Chamber and the second debate in Congress.

In addition to this, this year it is expected that there will be no problems in obtaining financing, the interests of local bonds have been falling and even the central bank improved economic growth prospects from 2.6% to 2.9% for this year.

In summary, everything indicates that the pressure is not as strong as years ago and that the situation tends to improve. Will all this be enough for the risk rating agencies improve our score?

The latest assessments made by this type of company were carried out last March for Fitch and Standard & Poor’s (S&P), while Moody’s did so in June of last year.

Moody’s reaffirmed an assessment carried out in February of that year when it downgraded the country’s debt from B1 to B2 and also set the country’s outlook at “negative”. This means that at that time the situation led to foresee that there were more conditions for things to get worse than to improve

“The negative outlook reflects the increased financing risks of Costa Rica due to the higher borrowing requirements resulting from the economic and fiscal shocks related to the pandemic,” Moody’s noted in that assessment.

Fitch and S&P they had equal ratings (B) also with negative perspectives. The three marked a line of what the country should do to improve its prospects, including as a core point a fiscal adjustment and the agreement with the IMF.

For economists consulted, what has been done so far would at least be enough for the rating agencies not to continue lowering the note.

“The approval of the agreement between the government and the IMF sends signals that in the fiscal adjustment the country will be accompanied by the Fund and that letter of introduction opens the possibility of obtaining funds with low interest rates and long terms. With this news, it is expected that international sovereign debt risk rating agencies will not downgrade Costa Rica’s rating and, at least, its keep in your current category“, He said Juan Muñoz Giró, Professor Economist at ULead, expert on risk and debt.

For Elio Rojas, An economist who is also an expert in risk and debt, with the current results, although they would not imply an improvement in the rating, Costa Rica could at least aspire for the outlook to change, from negative to stable or positive.

Why isn’t the situation better? In the opinion of analysts, there is a sustainability issue that is pending resolution.

Although this year would close with greater ease than previous years and that there is less pressure on the markets, the truth is that in the end the debt continues to grow and there will come a time when this is unsustainable. For this reason, it is necessary to reach a commitment that allows reducing the fiscal deficit (reaching primary surpluses) in a sustained manner.

Added to this is the issue of economic growth, which, although it is expected to be higher than that projected in January by the Central Bank, is still low compared to the rest of the countries in the region.

The rating agencies do not have a defined date or term to issue an evaluation on the countries.

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