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S&P downgrades Bolivia to BB- as commodity exports fall

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S&P downgrades Bolivia to BB- as commodity exports fall

S&P Global Ratings on May 23 lowered Bolivia's long-term sovereign credit ratings to BB-, three notches below investment grade, from BB, as a fall in commodities exports added to the country's current account deficit.

"[Bolivia] accumulated large external and fiscal buffers during the period of high commodities prices. However, lower export earnings in recent years have contributed to a trade deficit and current account deficit, eroding the country's external position," said S&P, noting that the country has run current account deficits since 2015.

The rating agency expects Bolivia's narrow net external profile to shift to a debtor position of 5% of current account receipts in 2019 from a creditor position of 8.7% in 2018 and 24% in 2017.

The current account deficit will gradually narrow in the next three years, falling to 5% of GDP in 2018 from 6.3% in 2017 on the back of rising oil prices and strong demand for imports, S&P said.

The agency assigned a stable outlook to its rating, reflecting its expectation that Bolivia's GDP, which grew 4.2% in 2017, will expand at around 4.3% in the next 12 to 24 months, driven by sustained public investment and consumption as a rebound in hydrocarbon prices boosts external revenues. Growth will also be supported by low inflation, which will likely come in at 3.5% in 2018, slightly above its level in 2017, and hover around 4% to 4.5% over the next three years.

S&P warned Bolivia's ratings could be lowered in the next 12 to 24 months if domestic credit rapidly increases and causes economic imbalances in the financial system, and if poor fiscal management results in a higher-than-expected rise in government debt. The rating agency expects "broad continuity" in economic policy through the 2019 national elections.

But the ratings could be raised if fiscal and other policy adjustments strengthen the Bolivian economy's resilience against external shocks, and if an exports surge sustains stronger-than-expected GDP growth, S&P said.

The agency affirmed the country's short-term sovereign credit ratings to B.

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.