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Fitch downgrades Costa Rica amid fiscal woes

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Fitch downgrades Costa Rica amid fiscal woes

Fitch Ratings on Jan. 15 downgraded Costa Rica's long-term foreign currency issuer default rating to B+ from BB as the country continues to face wide fiscal deficits and financing restrictions.

The rating agency removed the country's rating from Rating Watch Negative, a status it had assigned in November 2018. Fitch now has a negative outlook on the rating.

Costa Rica's B short-term foreign and local currency issuer default ratings, meanwhile, were affirmed.

Although Costa Rica passed fiscal reform late in 2018 to tackle its fiscal issues, Fitch said it expects a still-high fiscal deficit and rising debt burden for the country due to "limited near-term yield from the reform and a rapidly climbing interest bill." The rating agency is also uncertain whether the country will meet its financing needs as it awaits approval from the congress for external borrowing and as domestic financing rates remain high.

However, Fitch expects the country to post stable growth of above 3% in 2019 and 2020 after expected 2.7% growth in 2018. "Real GDP growth has continued to show resilience to ongoing fiscal imbalances. Nevertheless, macroeconomic stability is increasingly vulnerable to heavy government borrowing and demand for foreign currency."

In December 2018, Moody's downgraded Costa Rica's credit ratings as it also cited concerns about the country's ability to rein in its high fiscal deficit.