LatinNews Daily - 11 May 2020

* International credit ratings agency Fitch has downgraded Costa Rica's Long-Term Foreign-Currency Issuer Default Rating (IDR) from 'B+' to ‘B’, while the outlook is 'negative'. Fitch cites as grounds for its decision “increased risks of near-term financing stress due to widening fiscal deficits, a steep amortisation schedule and borrowing constraints, against a background of economic contraction caused by the effects of the coronavirus [Covid-19] pandemic.”. The negative outlook reflects “further downside risks to debt sustainability amid uncertain prospects for post-crisis fiscal consolidation, economic growth and borrowing costs”. Fitch expects Costa Rica’s GDP to contract by 4% this year; the fiscal deficit to widen to over 9% of GDP (up from 6.96% of GDP in 2019); and the central government debt burden to reach nearly 70% of GDP in 2020, up from 58.5% in 2019. Announced on 8 May, Fitch’s downgrade came on the same day that the government led by President Carlos Alvarado announced various measures aimed at reactivating the economy, including a ₡900bn (US$1.5bn) loan package for the productive sector.

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