Moody’s Investors Service predicts a stable credit outlook for countries of Latin America and the Caribbean in 2024.
This forecast persists even amidst potential economic and political pressures.
The region’s Gross Domestic Product (GDP) growth is expected to stay around 2.5 percent, similar to 2023’s rate.
This growth projection was outlined in Moody’s report titled “2024 Outlook: Stability amid Lower Debt Affordability and Political Risks.”
The report emphasized that the growth rate might limit increases in public revenue.
It also restricts options for fiscal policy as governments aim to balance fiscal consolidation with high social spending.
Central banks in the region are reducing interest rates. However, high borrowing costs will likely continue in 2024, affecting debt affordability.
Some countries, benefiting from favorable debt profiles, face longer-term debt maturities and reduced dependence on external financing.
Countries like Uruguay and Chile are examples of strong institutional frameworks and effective fiscal and monetary policies keeping risk premiums low.
However, countries with significant liquidity risks, particularly related to foreign currency debt, face high borrowing costs.
This is evident in nations like Argentina, Bolivia, and Ecuador.
In contrast, Costa Rica’s fiscal reforms have lowered government liquidity risks, decreasing risk premiums.
Political uncertainty and increased fiscal risks have widened spreads in Colombia, Mexico, Panama, and Peru.
Vulnerability of Central American countries and Mexico
Moody’s also notes the vulnerability of Central American countries and Mexico to reduced growth in the U.S. This is due to their close trade relationships, impacting exports and remittances.
Politically, the agency expects most countries’ institutional frameworks to remain resilient despite increasing polarization and demands for significant policy changes.
The Economic Commission for Latin America and the Caribbean (ECLAC) projects regional economic growth at 2.2 percent in 2023 and 1.9 percent in 2024.
This outlook highlights the interconnected nature of economic stability, policy decisions, and external influences in shaping Latin America’s future.