The S&P agency raised this Wednesday the Uruguayan sovereign debt note to BBB+ from BBB, with a stable outlook. In this way, Uruguay achieves the highest credit rating according to this rating agency.
The rating agency highlighted that “recent improvements to the fiscal policy framework,” together with “the probable approval” of the social Security Reform, they should “contribute to stabilizing public finances in the coming years” and “limit an increase in the debt burden.” “The probable approval of the social security reform is another sign of fiscal commitment,” the agency stressed.
“We expect these policies to support fiscal execution, along with GDP growth supported by a portfolio of diversified investment projects after the completion of the UPM 2 plant and related to infrastructure this year,” he added.
In this sense, S&P assured that the macroeconomic and institutional stability in Uruguay “will continue to support private investments, despite the high costs compared to the region in general.”
Investments in various sectors of the economy are expected to support GDP growth of around 2.5% on average in 2024-2026.
Uruguayan debt has an investment grade rating from the five risk rating agencies. The R&I and S&P agencies place it two steps above the minimum (BBB+) with a stable outlook, while Moody’s (Baa2) and DBRS (BBB) place it one notch above the minimum with a stable outlook.
Meanwhile, Fitch Rating (BBB-) places it at the minimum, with the addition that the latter improved its outlook from negative to stable in June 2022.
According to the statement, “the stable outlook indicates the expectation that continued economic growth and fiscal stability will contribute to a moderate fiscal deficit and the stabilization of debt levels.” Access the full statement from S&P.
What did Minister Arbeleche say about the rise in the note?
Economy Minister Azucena Arbeleche said that the improvement in S&P’s credit rating “confirms confidence in prudent fiscal management, something that is already being perceived at the investor level through the drop in country risk.”
“This credibility and trust in the management of public money generates greater well-being for Uruguayans”said Arbeleche.
As he said, “an increase in employment is generated as a result of an increase in investment in the productive sector”, and secondly he pointed out that “the tax burden on individuals and companies is reduced, as happened recently.”
Third, he added that “prudent fiscal management allows Uruguay access credits under more favorable conditions by reducing the resources allocated to the payment of debt interest” along with the possibility of “assigning more resources to priority sectors such as lower-income households, smaller companies, health, education, infrastructure, and housing.”
