Fitch Ratings has affirmed Peru's Long-Term Foreign Currency Issuer Default Rating (IDR) stands at 'BBB+' with a Stable Outlook.
These strengths balance vulnerabilities from high commodity dependence, financial dollarization, and a low government revenue base, as well as lower income per capita and governance indicators (including government effectiveness) than the current 'BBB' median.
Fitch assumes the political environment would prevent the implementation of such reforms over our forecast period. Real GDP growth has decelerated below the current 'BBB' median, with a five-year average growth rate of 3.2% versus 3.6% for peers.
New
copper investments are
increasing export and economic concentration in the metal (Peru is now the world's second-largest supplier) and intensifying its exposure to the commodity cycle.
"
Inflation is low and stable with public expectations well anchored," the credit rating agency said.
Furthermore,
inflation averaged 1.3% in 2018 amid economic slack and an absence of food price and external shocks. It is expected to pick up to the mid-point of the central bank's target band of 2%+/-1% in 2019-2020 as private consumption and non-mining investment rise moderately.
Firmer
copper prices and a small projected surplus of the current account balance plus
FDI are expected to keep the Sol-U.S. dollar exchange rate relatively stable during 2019-2020, limiting import-price-inflation pass-through.
Editor's note: Based on information provided by Fitch Ratings.
(END) NDP/DTK/MVB