Tuesday 22 June 2021

Fitch Downgrades Costa Rica to ‘B’; Outlook Negative

Fitch Ratings has downgraded Costa Rica’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘B’ from ‘B+’. The Outlook is Negative.

The downgrade of Costa Rica’s Long-Term Foreign-Currency (LT FC) IDR to ‘B’ reflects increased risks of near-term financing stress due to widening fiscal deficits, a steep amortization schedule and borrowing constraints, against a background of economic contraction caused by the effects of the coronavirus pandemic.

The ongoing health crisis comes at a time when Costa Rica’s fiscal space is limited and rapidly narrowing, raising risks to post-crisis debt sustainability. The interest bill is climbing rapidly, and the debt burden is on a relatively steep upward trajectory.

- Advertisement -

Fitch gave Costa Rica’s ratings a negative outlook due to “uncertain prospects” for economic growth and borrowing costs after the outbreak, it said in the report.

This year, Costa Rica will rely on loans from multilateral agencies to finance the budget. Looking ahead, however, the government could face higher funding costs in the international and domestic capital markets, Fitch said.

The rating agency expects GDP in Costa Rica to fall 4% in 2020 as containment measures against the coronavirus outbreak lead to lower demand and higher unemployment.

Domestic demand was already on the decline, thanks to high unemployment and weak private credit growth, but external demand is expected to fall as tourism comes to a halt and exports decrease.

- Advertisement -

But the economy will likely rebound and grow 2.6% in 2021, although a prolonged downturn in tourism could impact a recovery, Fitch said.

Before the coronavirus outbreak, Costa Rica issued US$1.5 billion in 11-year bonds in November last year to ease financing pressures for the first quarter this year.

Now the country plans to borrow up to US$3.18 billion from multilateral lenders in 2020, equal to 5.2% of GDP. Other than a US$500 million loan from the South American development bank, the government needs legislative approval to take out loans from the Inter-American Development Bank (IDB), the Central American Bank for Economic Integration (CABEI) and the IMF, according to Fitch.

“Failure to secure these external loans would lead to a fiscal financing gap, given prohibitive external market borrowing costs and limited domestic market size,” Fitch said.

 

- Advertisement -

FACT CHECK:
We strive for accuracy in its reports. But if you see something that doesn’t look right, send us an email. The Q reviews and updates its content regularly to ensure it’s accuracy.

Q Costa Rica
Reports by QCR staff

Related Articles

Fitch maintains Costa Rica’s risk rating at ‘B’, due to deteriorating public finances

QCOSTARICA - Fitch Ratings affirmed this Tuesday Costa Rica's Long-Term Foreign-Currency...

Costa Rica, Chile and Brazil have administered the highest number of doses per capita to date.

QCOSTARICA - Widespread vaccination is the key to overcoming the COVID-19...

MOST READ

Today’s Vehicle Restriction June 16: 5 & 6 CANNOT circulate

Today, Wednesday, June 16, vehicles with plates ending 5 & 6 CANNOT circulate The measure is countrywide and applied between 5:00 am and 9:00 pm,...

“Caso Cochinilla”: Name arose when comparing parasite with hidden corruption

QCOSTARICA - On Monday, the Organismo de Investigacion Judicial (OIJ) moved to the raid, seize and arrest of their investigation into corruption of public...

Companies covered up defective asphalt

QCOSTARICA - The judicial file of the Cochinilla Case, on alleged corruption in road works, exposes how three companies would have covered up the...

Bribed with cars, sexual favors and money in exchange for road works contracts

QCOSTARICA - The OIJ uncovered a big pothole on Monday when it was announced that public officials had allied with construction companies that, apparently,...

Today’s Vehicle Restriction June 18: 9 & 0 CANNOT circulate

Today, Friday, June 18, vehicles with plates ending 9 & 0 CANNOT circulate The measure is countrywide and applied between 5:00 am and 9:00 pm,...

13 Powerful Home Remedies for Acne

Acne is considered to be one of the most common skin ailments on the planet, with a record 60 million people being afflicted by...

Carlos Alvarado: “Don Rodolfo has my confidence”

QCOSTARICA - President Carlos Alvarado said he has all the confidence in his Minister of Public Works and Transport (MOPT, Rodolfo Méndez Mata, and...

Fifth tropical wave precipitation will be heavier in the north of the country

QCOSTARICA - For this Wednesday, the arrival of the fifth tropical wave of the season is expected, thus reinforcing the rainy activity mainly to...

Internet speed decreases during peaks in service

QCOSTARICA - Ever wonder why your surfing on the Internet slows down, to even a crawl, mainly in the evenings? This is due to...

WANT TO STAY UP TO DATE WITH THE LATEST!

Get our daily newsletter with the latest posts directly in your mailbox. Click on the subscribe and fill out the form. It's that simple!

Log In

Forgot password?

Forgot password?

Enter your account data and we will send you a link to reset your password.

Your password reset link appears to be invalid or expired.

Log in

Privacy Policy

Add to Collection

No Collections

Here you'll find all collections you've created before.