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Moody's changes Nicaragua's rating outlook to stable


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Moody's changes Nicaragua's rating outlook to stable

Moody's revised its outlook on Nicaragua's ratings outlook to stable from positive, citing the weakening of consensus-building institutions and political unrest.

Pension reform unilaterally introduced by the government in April has triggered social protests.

Moody's said: "While a resolution of this political and social unrest could surface in the coming months, it is becoming increasingly likely that the country's consensus-building model has been permanently weakened, reducing the effectiveness and predictability of policy."

The rating agency said that since the pension reform is unlikely to proceed as planned, the government would have to provide recurrent financial support to the social security body by cutting back on spending on social infrastructure. This would negatively affect growth, Moody's said.

Moody's could lower the ratings if the adverse political situation persists beyond 2018 and undermines growth and access to financial support from multilateral institutions. High oil prices and oil imports and reduced external financing, which include foreign direct investments, are additional pressures.

Ratings could improve if the political crisis and social unrest were to subside and the consensus-building policy-making tradition were restored, paving the way for pension reforms and improved fiscal conditions.

The rating agency expects that "the current political and social unrest will negatively impact growth this year, but still expects Nicaragua to recover in 2019 and resume a growth trajectory of about 4% should current adverse developments subside starting next year."