Although employing reforms that would support private investment and stronger growth, Argentina's government led by Mauricio Macri will face greater political pressure and external economic risks in 2017 which could hinder progress in consolidating these reforms, Moody's said.

Reforms brought about by the current administration include an agreement with holders of defaulted sovereign bonds that restored the country's access to international capital markets, the revamping of the national statistics institute, increased fiscal transparency and greater autonomy in the central bank.

Moody's noted, however, that "in a broad range of sectors, the continued improvement in credit fundamentals will be determined by the pace of the economic recovery, and policy makers' success at curbing inflation."

Meanwhile, banks will have new lending opportunities and the ability to adequately price risks due to the expected recovery in the economy and more market-friendly policies. However, lower inflation and a rise in real funding costs will impact profitability and capital. Asset risks are also present due to the removal of subsidies and a decrease in consumers' repayment capacity.