The risk rating agency Fitch Ratings, after its annual risk review, has decided to maintain the country’s rating at BB+, with a stable outlook.
In its annual risk rating review report dated November 22, 2022, Fitch confirms Paraguay’s rating at BB+ and the stable outlook.
Paraguay’s rating reflects its track record of macroeconomic policies prudent and consistent, low public debt and robust external liquidity relative to its peers with the same rating.
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The rating agency forecasts a growth of 5.8% in 2023, as a result of the drought for the 2022-2023 season. In the same way, it highlights large investment projects, such as: The Paracel Pulp Plant (the largest in the country’s history, with an investment of more than USD 3bn), which will support growth in 2023 -2024.
Additionally, it stands out that the maquila sector could present an annual growth of 25%, supporting the diversification of the economy. In matters of politics, Fitch expects that after the elections 2023 the continuity of policies is maintained, as well as fiscal prudence.
Within the framework of structural reforms, the technical agreement between the Government and the International Monetary Fund (IMF) stands out to use a Policy Coordination Instrument (PCI) that will serve as an anchor for the structural reforms and is based on three pillars of action:
1) Ensure the macroeconomic stability and protect the fiscal policy framework.
2) Improve the productivity and boost economic growth.
3) Improve the protection and social inclusion.
On the other hand, they point out the importance of promoting the approval and implementation of the reforms of the Civil Service, Pensions and the Fiscal Responsibility Law to achieve improvements in the rating.
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Also, Paraguay approved the Financial Action Task Force Assessment of Latin America (GAFILAT), evaluation of AML/CFT issues this year, avoiding the so-called ‘grey list’ and the associated reputational risks and positively reflecting on institutional capacity.
He mentions that in the 2023 Budget project he points to a deficit of 2.3% of GDP, with the intention of returning to the limit of deficit of 1.5% of GDP set out in its Fiscal Responsibility Act by 2024. Fitch believes that a return to fiscal rule is important to preserve fiscal credibility.
It is so, Paraguay manages to maintain his grade credit with the three rating agencies Moody’s, Standard & Poor’s and Fitch.
