Fitch affirms Peru's ratings at BBB+, Outlook Stable

"Peru's ratings reflect its strong public and external balance sheets and its longstanding credible and consistent macro policies, which have entrenched macroeconomic and financial stability," it expressed.

According to the credit rating agency, 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 has revised down its economic growth forecast for Peru to 2.5% for 2019 (from 3.5% in June) and around 3.0% (from 3.7%) for 2020-2021. 

"Global growth and trade uncertainty will weigh on Peru's exports, especially copper (...)," the agency warned.

It went on to add that new copper investments will lead to increased production and exports but are heightening Peru's sensitivity to the metal's price, investment and production cycles.

However, several large copper investments continue to anchor growth, and supply-side shocks in the first half of 2019 (1H19) have dissipated.

During the 1H19, the temporary blockade of a large copper mine's exports and low fishing yields caused the primary sector GDP to contract and local and regional government capital spending (40%-60% of government investment) slowed after local elections in October 2018.

Peru's potential growth is likely to remain at 3.5%-3.6%, absent substantial measures that would boost investment and productivity such as improvement in infrastructure or labor market reform.

Likewise, the government passed new competitiveness and infrastructure plans in 2019. 

(END) NDP/DTK/MVB