Weakening of institutions and governance would further affect investments, which could reduce economic strength, according to the rating agency.
Moody’s revised downward its outlook on the Peruvian economy, now taking it from stable to negative, as a result of the social and political crisis that has shaken the country since the departure of Pedro Castillo and the arrival of Dina Boluarte to the presidency.
“Social and political risks have intensified and threaten, in the coming years, with a deterioration of institutional cohesion, governance, policy effectiveness and economic strength through successive governments“, they detailed in a statement.
In detail, the outlook on Peru’s long-term foreign and local currency issuer ratings was lowered from Baa1 stable to negative.
On the other hand, they assured that they trust that the sovereign credit quality will continue to be anchored in the Peruvian strength despite the pressures of the sociopolitical environment on fiscal and economic stability.
They also noted that Peru’s local and foreign currency ceilings remain unchanged in the Aa3 tranche.
“The four-notch gap between the local currency ceiling and the sovereign rating remains, reflecting the government’s relatively low footprint on the economy and financial system. The lack of a gap between the foreign currency ceiling and the local currency reflects the absence of balance of payments restrictions, capital controls, exchange rate controls, and foreign or local currency restrictions,” they concluded.
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