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S&P lowers Guatemala's long-term ratings over political instability, weak growth

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S&P lowers Guatemala's long-term ratings over political instability, weak growth

S&P Global Ratings downgraded Guatemala's long-term foreign and local currency sovereign credit ratings to BB- and BB, respectively, amid government corruption scandals affecting economic growth prospects and investor confidence. The outlook is stable.

The rating agency said it expects Guatemala's real per capita GDP growth to average 0.9% in 2017-2019, down from the 1.4% average during the previous three years. The lower forecast is related to the political instability created by allegations that President Jimmy Morales and members of Congress received illegal campaign financing.

S&P said the political instability could spread as congressional and presidential elections will not take place until June 2019, impeding the approval of needed reforms.

"The political instability further limits the government's already weak capacity to execute public infrastructure investment and could have an impact on its already low revenue collection," S&P said.

Corruption cases and low government revenues also constrain the private sector's willingness to invest, according to S&P, which said that net foreign direct investment in Guatemala has declined consistently since 2012.

The ratings could be further lowered in the next 12 to 24 months if political disputes escalate and affect the sustainability of public finances, S&P said. The ratings could be raised if the government proposes and implements reforms aimed at improving public institutions, revenue and growth prospects.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.