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Moody's analyst: Resignation of Peru's president to impact banks in short term

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Moody's analyst: Resignation of Peru's president to impact banks in short term

The resignation of Peruvian President Pedro Pablo Kuczynski could likely affect the growth prospects of local banks in the short term, according to Valeria Azconegui, vice president-senior analyst for Moody's.

Kuczynski's exit, which was prompted by vote-buying allegations against his center-right government ahead of a second impeachment vote, could raise uncertainty about the future of the country, cooling the economy and slowing down investments, Azconegui said.

However, the analyst said the impact on the financial sector could be limited if the political transition process is fluid, given the strong asset quality and profitability of the country's banks. Peru's Vice President Martin Vizcarra is set to replace Kuczynski.

Vizcarra's succession signals a continuity of policies, said Jaime Reusche, vice president-senior credit officer for Moody's. "The fact that the vice president will be the one to assume the presidential mandate should reduce the political uncertainty that would have existed in case of early elections," the analyst noted.

Reusche added that the rating agency does not expect a material decline in the current orientation of the government's macroeconomic policies.

In conjunction, Moody's does not anticipate changes in Peru's A3 rating or its stable outlook, Reusche noted. The rating agency is also keeping its growth forecast of 3.5% in 2018 and 2019 for the country, the analyst said.