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Moody's: Peru's credit rating remains strong in the face of changes in fiscal trajectory

11:19 | Lima, Dec. 27.

Moody's Investors Service Vice-President Jaime Reusche on Friday said the urgency decree issued to change the fiscal trajectory in Peru will not affect the country's credit rating.

According to Urgency Decree 032-2019 published in El Peruano official gazette, the fiscal deficit for 2021 will likely be 1.8% of GDP, 1.6% for 2022, 1.3% for 2023, and 1% for 2024.

This measure will make the fiscal deficit rise in the 2021-2023 period by 1.7 percentage points of GDP (part of the 2.3 percentage points that were not used during 2018-2019).

"(According to the decree), the public debt will not rise by more than one point of GDP with respect to the previous fiscal trajectory, therefore, there will be no negative impact on the credibility of the country or on Peru's A3 rating," Reusche told Andina news agency.

He commented that government authorities had informed the rating agency of the actions Peru was going to take in order to change its fiscal trajectory without affecting the macroeconomic soundness.

"The (government) authorities had already told us of their intention to adjust the fiscal trajectory and the reasons that prompted this change, by illustrating the prudence that they always display before any action that would alter the public finance goals. From my point of view, the change is prudent," Moody's officer said.

According to the Ministry of Economy and Finance (MEF), maintaining the current deficit reduction trajectory, going from 2% of GDP in 2020 to 1% of GDP in 2021, would imply a significant withdrawal of the fiscal stimuli in 2021, which could have a negative impact on the economic growth, considering the external risks to which it is exposed.

(END) RGP/JJN/RMB/MVB

Published: 12/27/2019
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