Moody’s Projects Stable Outlook for Latin America as Economies Recover

Improving credit conditions and economic growth have led to a stable outlook in 2018 for sovereigns in Latin America and the Caribbean, according to a new report from New York-based credit rating agency Moody’s Investors Service.

Across the region, 19 of the 29 rated nations in the region rated by Moody’s, including Colombia, have a stable outlook, and two others have a positive outlook. On the downside, there are six countries — including Brazil, Mexico, and Chile — with negative outlooks, while two more are currently being reviewed for a downgrade by the big three rating agency.

Rising debt levels across Latin America and key elections, such as the May presidential election in Colombia that will determine the nation’s new head of state, further complicate a year that begins with encouraging economic growth momentum but will continue to face uncertainty.

“The increasing popularity of candidates promising steep changes in policy risks slowing, or even reversing, policy and reform implementation in some countries,” stated Moody’s in its report “Sovereigns — Latin America & Caribbean.”

Colombia is among those that the big three rating agency says will “see new administrations face greater social demands with fewer fiscal resources.”

Still, hopeful news abounds from outside Latin America, with Moody’s projecting “above-potential growth” in the United States alongside “stronger growth” in China. “The regional outlook incorporates Moody’s view that US-related policy risks have narrowed in the near term to NAFTA renegotiations,” stated the agency.

This along with ongoing domestic recovery in most large economies has led Moody’s to project regional GDP growth to finish at 2.7% in 2018, up significantly from the estimated 1.9% seen in 2017 and the 1.4% from 2016.

(Photo credit: Jared Wade)