Latin America should experience a mild recovery in 2019, but growth rates will be uneven and the region faces a number of macroeconomic and political risks that could exacerbate sovereign vulnerabilities, Fitch Ratings said.
According to the credit rating agency, potential risks include tighter external financing conditions, persistent fiscal challenges, trade protectionism, commodity price volatility and political challenges to economic reform.
In this sense, Latin America is currently the most vulnerable emerging market region to negative rating pressures.
Seven of 20 sovereign issuers in Latin America and the Caribbean are on negative rating outlook versus none on positive.
"Weak growth, rising debt, inadequate reforms and financing pressures were the key drivers of ratings downgrades and negative outlook revisions in 2018 and early 2019," Fitch expressed.
It went on to add the region is experiencing some positive trends including generally improving economic growth, contained inflation, and current account deficit adjustment. However, fiscal challenges remain pronounced.
"Latin America has had generally larger fiscal deficits and general government debt than other emerging market regions in recent years, and we expect this to continue in this year," it noted.
Furthermore, general government foreign currency debt has increased markedly over the past five years.
"Some countries in the region are engaging in fiscal consolidation plans, but there is a high degree of uncertainty regarding implementation given potential political risks and forthcoming elections," Fitch concluded.
Editor's note: Based on information provided by Fitch Ratings.
(END) NDP/DTK/MVB