Tuesday 22 June 2021

Fitch Revises Costa Rica’s Outlook To Negative; Affirms Ratings At ‘BB’

Fitch Ratings revised the rating of the Costa Rican economy from stable to negative, according to a press release issued by the rating agency.

The agency affirms a ‘BB’, which keeps Costa Rica in a category of high speculation.

Fitch says the negative outlook reflects Costa Rica’s diminished flexibiliyt to finance its rising fiscal deficit and public debt burden, at the same time it is not possible to specify a concrete solution that allows improving public finances.

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The ratings agency says “prolonged delays in addressing Costa Rica’s fiscal imbalance will amplify costs of future adjustments and raise risks to growth”.

The negative outlook also reflects Costa Rica’s “persistent institutional gridlock preventing progress on reforms to correct fiscal imbalance”.

Fiths says it expects Costa Rica will be able to manage its liquidity situation, however, tightening market conditions and persistent institutional obstacles point to growing funding challenges.

A year ago, Fitch downgraded Costa Rica from BB+ to BB, and from negative to stable outlook.

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The rating agency considers that “the likely winner of the presidential election on February 4, 2018 is very uncertain” and assumes that the winner will have another minority government and “will face challenges of a highly fragmented legislature, which could complicate the creation of coalitions and increase the legislative paralysis and the inertia of the reforms.”

For their part, BB’s rating is supported by structural indicators that are strong compared to their peers, such as high levels of per capita income, social development and government standards, the statement said.

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