Moody’s rating agency upgraded the outlook for Uruguay’s public debt to “positive” from “stable.” In turn, confirmed the note in “Baa2”, one step above the threshold of investor grade.
This upgrade in outlook comes seven years later, when Moody’s had upgraded it to “stable” from “negative.”
The decision was based on the prospects of economic growth; the successful implementation of fiscal policy, and the government’s commitment to the implementation of the fiscal rule, which will underpin the reduction of the public debt burdenas reported by the agency on Wednesday.
It also highlighted the strength of the institutions and governance that provided an effective political response to the pandemic crisis, and maintained political and social stability.
“Tax credibility”
“Over the last three years, adhering to the fiscal rule parameters built a track record of compliance and increased the credibility of fiscal policy,” Moody’s said.
In addition, he maintained that Parliament approved the social security reform bill that “will support fiscal sustainability, stabilizing pension spending as a percentage of GDP in the long term.”
“Following the continued commitment to the fiscal rule, Moody’s expects government debt to decline and stabilize at around 55% of GDP over the next 2-3 years from 61% in 2021,” the rating agency said.
Growth
On the other hand, he pointed out that the drought that began in December 2022 will weigh on economic activity in the near term, but Moody’s expects GDP growth to exceed the rate seen before the pandemic in the coming years.
“The economic impact of the drought will be partially offset by increased tourism, pulp production and strong private consumption,” the report says. Moody’s expects average annual growth of 2.7% in 2024-25, compared to just under 1% before the pandemic.
Last month the rating agency S&P it had upgraded the Uruguayan sovereign debt note to BBB+ from BBB, with a stable outlook.
This is Uruguay
Uruguayan debt has an investment grade rating from the five risk rating agencies. The R&I and S&P agencies place it two notches above the minimum (BBB+) with a stable outlook, while Modys (Baa2) and DBRS (BBB) place it one notch above the minimum. The first with a “positive” perspective and the second “stable”.
While, Fitch Rating (BBB-) places it at the minimum, with a stable outlook. Access the full statement here.
