Moody’s Investors Services downgraded Chile’s sovereign debt outlook to negative from stable.
According to the credit risk rating agency, its decision reflects the gradual but widespread erosion of Chile’s credit profile, which may continue to carry negative prospects.
“In Moody’s view, Chile’s GDP growth has undergone a structural shock, due to lower average copper prices and a decline in productivity, from which it is unlikely to fully recover its former strength,” Moody’s said.
Meanwhile, Moody’s noted that the lower economic growth has coincided with higher social demands that have eroded the fiscal position and led to a persistent rise in government debt. “Finally, the marked and quite rapid build-up of economy-wide external indebtedness, particularly in private non-financial corporations, increases external vulnerability,” the credit risk rating agency said in its report on Chile.
At the same time, Moody’s stated that “the rating affirmation at Aa3 reflects our view that Chile’s credit profile retains, at least for now, important strengths, with its scores on governance and policy effectiveness broadly in line with peers in the Aa category and well above the average for regional peers.”
The material has been provided by InstaForex Company – www.instaforex.com