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S&P downgrades Costa Rica; outlook negative


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S&P downgrades Costa Rica; outlook negative

S&P Global Ratings on Dec. 21 downgraded its long-term foreign and local currency ratings on Costa Rica to B+ from BB- as the rating agency pointed to external risk and a rising debt burden.

The outlook is negative.

"We expect that Costa Rica's general government fiscal deficit will hover around 5% to 6% of GDP in the next two years despite the recent approval of fiscal reform, contributing to a steady increase in its debt burden," S&P said in a statement. "A high debt burden, poor debt management, a rising share of government debt denominated in foreign currency, and a persistently high level of dollarization in the financial sector highlight Costa Rica's external vulnerabilities."

The rating agency said its negative outlook reflects an "at least one-in-three chance" of another downgrade in the next six to 24 months based on greater-than-expected erosion of the government's debt burden or signs of weakening access to liquidity due to external shocks or poor debt management.

S&P also affirmed Costa Rica's short-term foreign and local currency sovereign credit ratings at B and lowered its transfer and convertibility assessment to BB from BB+.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.