Jobs are in short supply in Costa Rica as a result of low levels of investment while sales of goods and services are dwindling; Risk of investing in Costa Rica increases due to weak public finances, according to Moody’s Investors Service.
Even a small increase in interest rates would mean that worse could still be to come for Costa Rica’s economy, says la La República (in Spanish).
Meanwhile, current holders of the country’s bonds, as well as anyone who becomes a pensioner in the coming years, would see a decrease in the value of the payments they receive.
An increase in interest rates is the likely result of an increase in the risk of investing in Costa Rica, says Moody’s.
On February 10, Moody’s said it downgraded Costa Rica’s long-term issuer and senior unsecured bond ratings to B2 from B1 and changed its rating outlook to stable from negative.
In the statement, the investor service said the key drivers for the downgrade include the country’s “High fiscal deficits” leading to an upward trend in debt metrics which will remain above rating peers; and, “Recurring funding challenges” resulting from relatively large borrowing requirements introduce risks to Costa Rica’s credit profile
In a related decision, Moody’s lowered Costa Rica’s long-term country ceilings: the foreign currency bond ceiling to Ba3 from Ba2; the foreign currency deposit ceiling to B3 from B2; and the local currency bond and deposit ceilings to Ba1 from Baa3. The short-term foreign currency bond ceiling and the short-term foreign currency deposit ceiling remain unchanged at Not Prime (NP).