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S&P downgrades Argentina on weakening economic growth prospects, rising debt

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S&P downgrades Argentina on weakening economic growth prospects, rising debt

S&P Global Ratings lowered Argentina's long-term foreign- and local-currency ratings to B from B+, with a stable outlook, and removed the ratings from CreditWatch with negative implications.

The downgrade reflects an erosion of Argentina's economic growth trajectory, inflation dynamics, and debt profile following setbacks in the government's implementation of its challenging economic adjustment program, the rating agency said. The country's GDP is expected to contract by 2.5% in 2018 and by about 1% in 2019 before modestly recovering the following year. Inflation is expected to be about 44% at the end of 2018 and decrease gradually toward 25% in 2019.

The country's debt burden has risen due to the rapid depreciation of the peso against the dollar. Net general government debt could exceed 80% of GDP in 2018 from 50% in 2017, the rating agency said.

S&P said the stable outlook is based on its expectation that the government would be able to implement fiscal, monetary and other measures to stabilize the economy over the next 18 months, gradually addressing the deterioration in the country's financial profile and debt burden, and reversing inflation dynamics. The ratings could be lowered over the next 12 months if unexpected negative political developments further damage investor confidence in the country, while successful policy implementation could lead to a ratings upgrade over the next two years.

The rating agency also affirmed Argentina's short-term foreign- and local-currency ratings at B.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global. 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.