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Peru's political crisis to impact investment, growth, Moody's says

Moody's will likely cut its 2019 GDP growth forecast for Peru and could change its rating outlook on the country to negative from stable, depending on how Peru's ongoing political crisis plays out, Jaime Reusche, head of sovereign risk at the rating agency, said in an interview with Gestión.

According to Reusche, foreign banks are recommending that investors reduce their exposure to Peru's sovereign bonds, which could have a negative impact on yields and lead to an increase in country risk.

He said Moody's was earlier planning to lower its 2019 economic growth forecast for Peru to 2.7% from 3.2%, but following President Martin Vizcarra's dissolution of Congress and the resulting political mayhem, it will now probably lower the projection to 2%.

"Private investment will be affected by everything that is happening, and this is likely to generate some disruption in public investment," Reusche said.

Vizcarra dissolved the opposition-run Congress on Sept. 30, blaming lawmakers of repeated attempts to choke his government's anti-corruption reforms. Although opposition legislators were quick to declare Vice President Mercedes Araoz as the country's interim leader, she refused the role and resigned in hopes of ushering "general elections as soon as possible."

Gestión reported separately, citing government sources, that Peruvian Economy and Finance Minister Carlos Oliva stepped down and was replaced by Maria Antonieta Alva.