Sovereign ratings in Latin America are expected to stabilize in 2018 amid expectations that the region's GDP growth will rebound in that year, Fitch Ratings said Dec. 6.
The rating agency projects regional GDP growth to speed up to 2.2% in 2018 from an estimated 1.1% in 2017, thanks to a recovery in global activity, a pick-up in domestic demand and relatively stable commodity prices.
It warned, however, that the anticipated economic rebound in the region is likely to "fall far short" of the average 4.1% growth seen in 2010-2013.
The rating agency cited trade protectionism and stricter immigration controls from the U.S., falling commodity prices, and tighter external financial conditions as main downside risks to the growth outlook. Upcoming elections in Latin America in 2018 could also weigh on economic recovery, particularly in Brazil and Mexico, and lead to asset price volatility, the report noted.
Inflation is expected to remain "moderate" in 2018, indicating continued accommodative monetary policies, while current account deficits are expected to "deteriorate only slightly."
Fitch said the upside momentum in Latin American sovereign ratings is "limited," with only Argentina on positive outlook. Three other sovereigns are on negative outlook.
The rating agency said that countries remain vulnerable to shocks and ratings could come under renewed pressure if reforms are not undertaken to tackle lower growth potential and rising debt burdens.