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DBRS confirms Argentina on reform progress, improving economy

DBRS on June 5 confirmed its ratings on Argentina, noting that local authorities are making substantial progress on a reform agenda and the economy seems to have escaped from a recession.

DBRS confirmed the country's long-term foreign and local currency issuer ratings at B and B (high), respectively, and its short-term foreign and local currency issuer ratings at R-4. The trend on all the ratings remains stable.

Argentina's new monetary policy framework has been mostly successful in lowering inflation so far, the rating agency said, adding that the government has also widened its sources of domestic and external financing. However, the country's deficit is still large and fiscal discipline will be crucial in order to restore macroeconomic stability.

"Risks on the horizon include continued political and social pressures for higher spending and a potential decline in political support for the Macri government," DBRS said. "External developments could also weigh on growth prospects and increase the cost of funding."

The rating agency further said that while Argentina has returned to international markets and embark on a gradual fiscal adjustment, limited financial intermediation in the economy serves as a restraint on investment.

Real growth in Argentina has averaged 2.5% over the past 20 years, and the country also shows relatively high levels of productivity compared to other emerging economies in the region, DBRS noted.