Moody's downgraded Chile's issuer and senior unsecured debt ratings to A1 from Aa3 and changed the outlook to stable from negative, saying it does not expect a reversal of the broad-based deterioration in the country's credit profile.
The rating agency said Chile's fiscal position has worsened continuously in the last few years and it is not expected to regain its credit strength despite near-term improvements in economic and fiscal prospects.
High GDP growth compensated for Chile's low income levels compared to Aa-rated peers, dependence on commodities and external vulnerabilities in the past, Moody's said, but lower medium-term growth prospects suggest these elements have become more salient aspects of the country's credit profile.
Chile's medium-term growth is expected to be around 3%, lower than the estimated 3.7% annual rate in 2018 and significantly below growth rates reported in years before the commodity shock of 2014, it said.
The stable outlook is based on the expectation that the country will retain its high institutional strength reflected in governance and policy effectiveness. The outlook also takes into account the government's fiscal consolidation efforts and its approach to improve fiscal management.