On the afternoon of this Thursday, April 18, the country risk rating agency Standard & Poor’s (S&P) announced that it maintains the rating for Guatemala at BB, but modifies the outlook from “stable” to “positive.”
The information was confirmed jointly by the Bank of Guatemala (Banguat) and the Ministry of Public Finance, which stated that “the credit risk rating for Guatemala was maintained at “BB” and that the outlook improved to “positive.”
As of December 31, 2023, according to the Public Credit Operations report, the S&P grade was “BB” with a “stable” outlook, but now it has been improved to “positive.”
The change in outlook means the agency sees country conditions for the next 12 months. The “BB” grade means less vulnerable in the short term, “but faces great uncertainty in the face of adverse financial and business economic conditions.”
It is the first rating agency to provide a review of the country grade for the current government administration and next May the arrival of a mission from the International Monetary Fund (IMF) is expected to evaluate the so-called Chapter IV.
Stability
According to an official statement, the agency valued “Guatemala’s long history of macroeconomic stability and economic resilience, in a context in which manageable fiscal deficits, the very low level of net debt, the solidity of the external profile and the history “Robust monetary policy constitutes crucial strengths of the Guatemalan economy.”
In S&P’s consideration, according to the statement, “the agency highlights the fact that Guatemala’s net debt, which represents approximately 16% of GDP in 2024, is among the lowest in Latin America.”
They specify that the country has maintained cautious fiscal and monetary policies, despite the fact that political institutions are still evolving. And he points out that political uncertainty seems to have decreased after the inauguration of President Arévalo -Bernardo- and that there is an initial feeling of collaboration between the administration, the private sector and even some members of the opposition in Congress.
“S&P Global Ratings estimates real economic growth of approximately 3.5% annually, underpinned by consumption, supported by family remittance flows, better prospects for domestic private investment and a soft landing for the United States economy. America, on which Guatemala depends to a large extent,” notes the official statement.
Key initiatives
Juan Carlos Zapata, executive director of the Foundation for the Development of Guatemala (Fundesa), highlighted that the improvement of Guatemala’s country risk rating demonstrates the joint work of important initiatives that the government, business sector, academia, multilaterals and civil society They are working through efforts such as Guatemala No Se Detiene, where there is a clear path to improve investment conditions. And in his opinion this not only makes the country more attractive to investors, but also demonstrates the confidence in Guatemala on the part of international markets.
“The relaunch of the Country Risk Table will surely continue to prioritize efforts that allow Guatemala to become Investment Grade,” concluded Zapata.
What is expected in the future
According to the statement, S&P expects that “the new authorities will increase fiscal deficits over the next three years to boost capital spending, primarily for airports, ports, roads and energy infrastructure, while maintaining macroeconomic stability.”
It predicts that future current account deficits, to achieve these investments, will only marginally affect the external resilience of the Guatemalan economy. And it points out that the central bank’s solid monetary policy allowed inflation to fall to the center of its target range (4% annually), which reflects the central bank’s commitment to controlling inflation and the operational independence of said institution.
Notes for Guatemala
Standard & Poor´s: BB/Positiva/B
Moody´s: Ba1/Stable
Fitch Ratings: BB/Stable
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