LatinNews Daily - 25 July 2022

In brief: Honduras minister rejects S&P outlook revision

*Honduras’s finance minister, Rixi Moncada, has rejected the latest update by international credit ratings agency Standard & Poor’s (S&P) which affirmed Honduras’s sovereign credit rating at ‘BB-/B’ but lowered its outlook to negative on the expectation of fiscal deterioration. According to an S&P statement, “the negative outlook reflects our view that there is at least a one in three chance that we will downgrade Honduras in the next six to 18 months, if the fiscal deterioration worsens the sovereign debt burden beyond our expectations”. S&P expects that the fiscal deficit will reach 3.2% of GDP in 2022, up from 3.1% in 2021, bringing general government debt to 47% of GDP, which, while down from 48.5% of GDP in 2021, is still up from 38.8% of GDP in 2019. Moncada complains that S&P’s latest assessment fails to take into account the results of tax take which, as of June 2022, exceeded the government’s goal by 16.3%. She said that revenue was up 24.7% on the same period in 2021. She also complained that S&P failed to take into account fuel and energy subsidies which absorbed 1.13% of inflation. S&P forecasts that Honduras’s GDP will grow 3% in 2022 while average annual inflation is projected to come in at 12% in 2022, well beyond the official target of 4% +/-1 percentage point. It expects inflation to return to within the official target range in 2024.

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