Bolivia Downgraded To #BB-# On Weaker External Outlook Is Stable

Stocks and Financial Services Press Releases Thursday May 24, 2018 08:54
S&P Global Ratings--24 May--S&P Global Ratings

On May 23, 2018, S&P Global Ratings lowered its long-term foreign and local currency sovereign credit ratings on Bolivia to 'BB-' from 'BB'. At the same time, we affirmed our 'B' short-term foreign and local currency ratings. The outlook on the long-term ratings is stable.

We also lowered our transfer and convertibility assessment to 'BB-' from 'BB'.

The stable outlook reflects our view that in the next 12-24 months Bolivia's economy will continue to grow at around 4.3%, underpinned by sustained levels of public investment and consumption, thanks to a recovery in external revenues stemming mainly from the rebound in hydrocarbon prices. We expect that such growth will be accompanied by large but declining current account and fiscal deficits. We expect broad continuity in economic policy through the national elections in 2019. We also expect domestic credit growth to decelerate in the coming years after many years of rapid increase.

We could lower our ratings on Bolivia in the next 12-24 months if we see indications of unexpected economic imbalances in the financial system stemming from a rapid increase in domestic credit. We could also lower our ratings if fiscal slippage results in higher-than-expected annual increases in net general government debt.

We could raise our ratings on Bolivia in the same period if timely and substantial adjustment in fiscal and other policies were to contain and reverse the ongoing deterioration in the sovereign's external profile, resulting in greater economic resilience against external shocks. Similarly, better-than-expected export performance, especially through improved prospects for long-term hydrocarbon output and exports, could sustain favorable GDP growth beyond our expectations and contain the current account deficit (CAD).

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