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Fitch agency downgraded the sovereign rating note from Chile from A to A-, due to the effects of the social outbreak and the consequences of the pandemic on public finances.
The Government, meanwhile, admitted that this will have some consequences, but stressed that the country continues to be up in the emerging world.
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The Fitch Ratings agency lowered Chile’s sovereign rating from A to A-.
This, alluding to the weakening of public finances due to secular pressures to increase social spending, as a result of the protests since October 18, aggravated by the economic recession due to the pandemic.
But also, the agency predicted that the burden of public debt will continue to rise in the medium term, due to Chile’s lower trend growth prospects and difficulties in consolidating its fiscal accounts amid a strong political calendar and social pressures.
In the analysis, the country went from a negative projection to a stable one, based on a credible macroeconomic policy framework and a still low public debt burden compared to other countries.
The Minister of Finance, Ignacio Briones, recognized the effects this will have on interest rates and risk premiums.
The head of the fiscal coffers, yes, stressed that the country continues to be up in the emerging world.
On the projections of the central government’s fiscal deficit, Fitch projected a closing of 8.5 of the Gross Domestic Product, and of 5.1 for 2021, before which the agency states that a tax reform is probably necessary for structural improvements.
On that last point, the economist of Rojas y Asociados, Patricio Rojas, agreed, who considered it worrying that in the medium term the situation would look complex.
The economist considered that in the short term, the path is optimize spending and propose options such as an increase in people with income tax.
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