The confirmation of Peru’s investment grade sovereign credit rating (BBB+) with stable outlook, reflects the nation’s potential of driving sustainable growth over the mid- and long- term, the financial ratings agency Standards and Poor’s (S&P) has said.
“Our long-term foreign and local currency ratings on Peru reflect its enhanced capacity for stable long-term GDP growth amid low fiscal risks and manageable vulnerabilities to external shocks,” the New York-based ratings firm said.
In a recent report, S&P noted Peru’s stable outlook is based on expectations that investment in the energy and mining sectors will continue at a steady, high pace through the 2016 national elections, thus supporting economic growth and limiting risk.
Likewise, it forecasted that high investment rate in Peru (more than 27 percent of GDP) should keep the sovereign's per capita GDP growth above 4 percent per year throughout the next two to three years.
“This is significantly higher than the average growth rate of most other countries in the Latin America and the Caribbean that are at a similar stage of development,” the financial services firm said in a study which was put out Tuesday.
In that sense, S&P predicts the Peruvian economy will likely to rebound in 2015, on the back of of large investment projects, particularly in the nation’s key sectors of mining and infrastructure.
The rating services praised the Andean nation’s sound macroeconomic policies over the past two decades for having given the government scope to introduce countercyclical policies to mitigate the impact of negative shocks, including lower commodity prices, but also weather effects such as El Niño.
“In recent months, the Ollanta Humala administration has increased spending, while the country’s Central Reserve Bank (BCR) has lowered interest rates and reduced reserve requirements to counteract slower growth,” S&P noted.
Moreover, the agency went on to point out the Humala administration has taken advantage of recent years of favorable commodity prices by making structural changes to fiscal policy, improving its Fiscal Responsibility Law (FRL), smoothing the country’s debt profile and boosting its Fiscal Stabilization Fund.
“Such measures improve the sovereign's capacity to undertake countercyclical fiscal and monetary policies, thus boosting the resilience of the Peruvian economy in the event of a sharp fall in export prices or other external shocks,” S&P revealed in its latest report.
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Published: 8/27/2014