Fitch downgrades Bolivia on deteriorating growth prospects
October 1, 2020 |
Rating agency puts the country deeper into junk territory with a B rating and a negative outlook
Fitch Ratings on Wednesday cut Bolivia's long-term sovereign foreign currency credit rating to B from B+, further pushing it down into junk territory, citing deteriorating economic growth prospects, public finances and political tensions.
The outlook for the rating was revised to stable from negative, Fitch said in a statement.
"Fitch projects Bolivia's economy will contract by 7.5% in 2020 (having already fallen 8.0% in H1 according to the monthly activity index), reflecting a severe blow to domestic and external demand from the coronavirus pandemic and strict lockdown measures, as well as supply-side disruptions from the August road blockades and broader political turmoil," Fitch said.
Economic growth is projected to recover to 3.9% in 2021, "but the outlook is highly uncertain given a lack of clarity on policy plans," Fitch said.
Bolivian's head to the polls on October 18th for a general election that is occurring after several postponements.
"Political and social polarization has intensified in this period, culminating in violence and road blockades in August. Political tensions could persist post-election, and any government is unlikely to count on a strong legislative majority, posing challenges to the smooth implementation of policy adjustments and reforms to improve growth prospects," Fitch said.
The interim president, Jeanine Áñez, dropped out of the race. She took over in a power vacuum after former President Evo Morales was forced to step down after widespread protests over alleged electoral fraud. Morales is in exile in Argentina.
The decision by Fitch to lower the rating to B matches the same level as Moody's decision on September 23 to cut its credit rating on Bolivia to B2 with a stable outlook, citing similar reasons.