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LatinNews Daily - 16 October 2020

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In brief: Fitch lowers Chile’s ratings

* International credit ratings agency Fitch Ratings has lowered Chile’s Long-Term Foreign-Currency Issuer Default Rating (IDR) from 'A' to ‘A-‘, and its Long-Term Local-Currency IDR from ‘A+’ to 'A-'. In a press release, Fitch said that the downgrade “reflects the weakening of public finances in the wake of secular pressures to increase social spending in the aftermath of widescale protests in October-November 2019, which have been compounded by the economic downturn precipitated by the coronavirus [Covid-19] pandemic”. Fitch forecasts that the government debt burden will “continue to increase over the medium term”, due to weaker economic growth prospects and difficulties in consolidating its fiscal accounts. The agency estimates a central government fiscal deficit of 8.5% of GDP in 2020, up from 2.8% in 2019, and projects that general government debt will rise to 34% of GDP in 2020, up from 28% in 2019. It also forecasts that Chile's economy will contract by 5.8% in 2020, due in large part to the measures imposed to control the spread of Covid-19.