Fitch Ratings expects Argentina's three-year, $50-billion standby arrangement with the International Monetary Fund to help alleviate the sovereign's financing risks, especially amid weaker market confidence.
Of the total amount, Fitch notes $15 billion will help cover Argentina's borrowing needs from 2018 to 2019, while the rest will be on standby as a precautionary measure.
However, Fitch warned that future rating prospects for Argentina depend on whether it can carry out economic policies to restore credibility and lower macroeconomic vulnerabilities, Fitch warned. The rating agency lowered its outlook on the country to stable from positive due to "negative implications for economic prospects and the policymaking environment."
Fitch forecasts inflation to grow to 27.5% by year-end 2018, which will weaken real wages and confidence. The rating agency also lowered its GDP growth forecast for 2018 to 1.3% from 2.6% previously.
The Argentine government has vowed to speed up fiscal consolidation efforts, allow the exchange rate to float, and grant greater autonomy to the central bank. However, these efforts may face considerable political risk especially because of the sharply lower popularity of President Mauricio Macri.
Fiscal consolidation will likely be the hardest to achieve as Fitch expects a combination of spending cuts and buoyant tax collections will help reach the 2.7% fiscal deficit target this year, but targets in following years will be more difficult to attain.
