S&P Global Ratings: "Peru's macroeconomic fundamentals are solid”

There will be a contraction of the Peruvian economy, that is a fact. The economic effects of the pandemic are increasingly being felt in the region. The fall in the price of raw materials affects several countries, including Mexico, where the fiscal response has not been the best.

As for Peru, the world-renowned U.S. risk rating firm S&P Global Ratings said via Europa Press that, despite the negative impact of the coronavirus, the country's solid macroeconomic fundamentals should mitigate the impact of the crisis and even encourage support from its creditors.

Metaphorically speaking, the Peruvian boat has a strong hull and good rigging against the storm. There is even room on deck for other experienced (and solvent) sailors.

Peru's President Martín Vizcarra already predicted things to come when he declared in March: "We have to reach into the treasury's pocket to address the needs of vulnerable families." The president assured that the government's priority in this crisis would be to protect the health of Peruvians as well as the country's economy.

Economy Minister María Antonieta Alva added that, after decades of fiscal discipline, Peru has accumulated savings and has a good level of debt in the capital markets; furthermore, it has contingent credit lines ready with multilaterals.

In order to preserve lives, debt is not ruled out, is the literal translation of the above. And, fortunately, in terms of debt capacity, Peru has a passing grade. S&P Global Ratings confirmed a long-term credit rating of 'BBB+' for Peru, as well as a 'stable' outlook.

The sky is beginning to clear on the horizon.

A cure is urgently needed

Beyond the availability of foreign currency and the borrowing capacity of certain countries such as Peru, there is one key factor that could further accelerate recovery: the discovery of a cure for COVID-19. In recent statements, economics expert Nora Lustig reaffirmed this position: "If, for example, a drug is discovered soon that is prophylactic in treating the disease and can be implemented quickly, then it will be possible to relax the containment measures a lot quicker, which will speed up the [economic] recovery,” she told the BBC.

The arrival of the antidote will not only reverse the disease, but also the financial blow.

A promising future

The calculations released by S&P Global Ratings in relation to Peru enable us to predict an encouraging outlook for the Bicentennial of Independence. While the company predicted a 3.1% contraction in GDP in 2020, it also expects a growth of 5.5% in 2021, 3.8% in 2022, and 3.7% in 2023. If this growth occurs, the U.S. firm said, Peru's credit ratings will be even better.

"The measures taken by the Peruvian authorities should help stabilize the economy and direct it towards the social and health costs associated with COVID-19. In our opinion, the country has enough fiscal space to handle the pandemic, despite the fact that we expect the global economy to fall," affirmed the company in an article published by Publimetro Mexico.

Sources: Publimetro/ El Economista/ BBC