Credit watchdog Fitch Ratings has affirmed the country’s credit grade at ‘BBB’ or two notches above investment grade while maintaining a negative outlook.
It cited risks from global headwinds for the still dire outlook.
“The negative outlook reflects risks to medium-term growth prospects, fiscal adjustment path and external buffers in an environment of higher interest rates, weaker external demand and higher commodity prices,” according to Fitch.
It added the “BBB” rating balances strong growth, external finances, and a credible economic policy framework against lagging structural indicators, including per capita income and governance, relative to peers.
“We forecast real GDP growth of 6.8 percent in 2022 on strong domestic demand, reflecting normalization of economic activity after the pandemic and the government’s investment program,” the American ratings firm said.
Slowdown seen in H2
Growth in the first half averaged 7.8 percent and our forecast assumes a “slowdown from the second half amid monetary tightening, high imported inflation and weaker global demand. Output will exceed pre-pandemic levels in the second semester and is close to potential,” Fitch indicated.
The ratings firm said output growth is likely to slow to 5.5 percent in 2023 before recovering to 6.2 percent in 2024.
Downside risks include global growth falling below Fitch’s forecasts of 1.7 percent in 2023 and 2.8 percent in 2024, or the central bank raising policy rates beyond its assumption of 5.25 percent.
Further growth risks stem from potential economic scarring from the pandemic due to learning losses.
Lower public-sector investment, as envisaged under the government’s fiscal program, may slow one of the key tailwinds to growth in recent years, Fitch warned.
It said, however, this could be offset by higher private investment, which the government is targeting, and the investments could yield growth dividends not accounted for in its forecasts.