Fitch Revises Peru's Outlook To Negative, Affirms Rating At 'BBB'

• Fitch Ratings on Thursday revised Peru's outlook to negative from stable, saying a deterioration in political stability and government effectiveness has increased downside risks to the country's ratings.
• The rating agency said it expects the weakening of Peru's political governance institutions will be difficult to reverse before the end of 2024, adding that "weaker governance poses greater downside risks to investment and economic growth" than the agency had expected earlier this year.
• Peru's 'BBB' ratings are supported by its moderate public debt, net external creditor position, and track record of solid macroeconomic policy and fiscal frameworks. Rating constraints include lower governance, income per capita, and social indicators than the 'BBB' median, high commodity export dependence, and the low government revenue base.
• Further deterioration of political conditions or governance indicators that undermine the political and economic framework; sustained economic growth underperformance relative to historical levels or weakening of the policy framework; sustained increase in general government debt/GDP could all lead to negative rating action.
• On the other hand, higher economic growth performance and prospects; easing political gridlock and uncertainty that improves governability; and maintenance of prudent fiscal policy settings that lead to a durable stabilization of government debt/GDP ratio are all factors that could lead to better ratings.

(Source: Fitch Solutions)