The agency Moody’s Investors Service changed the outlook of Peru’s credit rating (Baa1) from stable to negative due to the political and social risks that continue to be present in the country, as well as the current social confrontation.
Despite this, the Ministry of Economy and Finance (MEF) clarified that “Peru continues to be the country with the second best credit rating in the region, which is supported by its low levels of public debt and Moody’s expectation that the Peru’s institutions and general policies are effective in containing the pressures on fiscal spending from the sociopolitical environment”.
Moody’s modified Peru’s credit outlook because, in their opinion, social and political risks have intensified, threatening institutional cohesion, governance, policy effectiveness, and the economic strength of the next governments in the coming years. .
However, Moody’s notes that the negative outlook could be changed to stable if social discontent eases with an apparently lasting political and social solution, and there are no signs of material deterioration in Peru’s institutional framework, particularly in elements associated with the macroeconomy and government efficiency. Likewise, he comments that Peru could improve its credit rating if there were a more harmonious political environment that strengthens institutional cohesion and results in the adoption of reforms that promote sustainable growth. The strengthening of governance indicators, particularly those related to political institutions, corruption and the informal economy, would improve the solvency of the Republic.
On the other hand, the credit rating could be adjusted downward if social instability, political polarization, and the reduction in the effectiveness of policies that lead to abrupt changes in them continue, aspects that would reduce investor confidence, affecting medium-term growth and complicating fiscal management. Similarly, the initiation of a constituent process intended to promote a broad review and modification of the policy framework and economic model would weaken the structural pillars of Peru’s credit profile and could also lead to a downgrade. that counts today
