Moody's Investors Service has affirmed its outlook for Latin American (LatAm) and Caribbean sovereign creditworthiness in 2019 is stable overall, reflecting its expectations for the fundamental credit conditions that will drive sovereign credit over the next 12-18 months.
The stable outlook reflects still supportive economic growth
, improved debt structures that mitigate liquidity risks
, and moderate balance-of-payments risks.
Likewise, commodity-exporting economies will grow at a similar pace to 2018.
"We expect commodity prices to recover only mildly in 2019, with oil prices remaining volatile around current levels. Robust domestic demand and private investment will drive economic growth in Chile and Peru (A3 stable)
, but growth will slow as the economies move closer to potential," it expressed.
Furthermore, a recovering energy sector will support economic growth in Trinidad & Tobago, while gradual fiscal consolidation to address macroeconomic imbalances will keep growth subdued in Ecuador (B3 negative).
"We expect narrower fiscal deficits in Chile, Barbados, Argentina, Colombia, Peru
, and Brazil, but this will only lead to debt stabilization in the case of Chile," Moody's said.
"We expect Barbados to implement the largest adjustment, with a deficit of 1.8% of GDP turning into a 2.5% surplus in 2019, while Colombia's fiscal deficit will narrow to 1.3% of GDP from 2.0% in 2018," it added.
Moreover, sovereign credit exposure to tighter external funding conditions and a stronger US dollar is relatively contained in LatAm given improved debt structures.
In this sense, proactive liability management operations have lengthened debt maturities for several countries and lowered the share of foreign-currency-denominated debt.
Additionally, some governments have financial buffers in the form of liquid assets or flexible credit lines with the International Monetary Fund (IMF).
Chile, Peru, Uruguay, and Mexico appear only moderately vulnerable to a shift in global financing conditions on account of (i) moderate government borrowing needs, (ii) the length of their average debt maturities, and (iii) the presence of financial buffers.
Editor's note: Based on information provided by Moody's.