(Bloomberg) -- Fitch affirmed Peru’s investment-grade rating on Tuesday, assuaging concern that the South American nation was headed closer to junk.
The firm maintained the credit rating at BBB, on a par with Moody’s and two levels above junk, and raised its outlook to stable from negative. S&P Global Ratings, meanwhile, has Peru at the lowest investment grade following a downgrade in April.
“Amid heightened political volatility that drove an economic recession last year, sound policymaking has supported an economic recovery this year and preserved broad macro-financial stability,” Fitch said in a statement.
The decision is the second piece of good news for the government in two months, after Moody’s raised its outlook on Peru to stable from negative in September, citing political reforms. That announcement had caught some by surprise, following S&P decision in April to reduce its rating by one notch, saying political turmoil was hampering attempts to rebuild fiscal buffers.
Concerns over Peru remain. Its fiscal deficit is set to widen to as much as 4% of gross domestic product this year, exceeding the 2.8% limit set by congress for the second consecutive time. The deficit has increased due to falling tax revenues and a large public investment program meant to boost growth in Peru, which slid into recession last year.
After shrinking 0.6% in 2023, the second-worst contraction in more than 30 years, Peru’s economy started to bounce back in 2024, supported by higher copper prices. Its recovery has beaten expectations and the government is bullish that the economy can grow more than 3% this year.
Still, the nation is struggling to find some political stability after cycling through seven presidents in eight years. Its current leader Dina Boluarte, one of the world’s most unpopular leaders, faces an investigation into illegal enrichment.
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