(Adds comments, quotes from Leos and Torres, background on
BUENOS AIRES, Sept 29 A slower reduction in
Argentina's deficit than initially promised by President
Mauricio Macri's government does not impede a credit upgrade in
Argentina, Moody's senior analyst Mauro Leos said in an
interview on Thursday.
The government said earlier this month Argentina would
register a 2017 fiscal deficit equivalent to 4.2 percent of
gross domestic product, higher than the 3.3 percent promised in
January but lower than its expected 4.8 percent gap in 2016.
Moody's forecasts the deficit will actually be 5 percent of
GDP next year.
Moody's Senior Credit Officer Gabriel Torres told
journalists in Buenos Aires that trends were positive in
Argentina and the next step would be to change its outlook on
the country's credit rating, though there was no set date on
when this could happen.
Because the government was largely absent from global
capital markets due to sovereign debt defaults in 2002 and 2014,
its debt to GDP ratio is relatively low, which means taking on
modest amounts of debt to finance the fiscal deficit is not an
urgent concern, said Leos, a senior vice president in charge of
Latin American credit ratings for Moody's.
"It's one of this government's most important changes - they
are using that financing space, and the debt will rise. The
levels are not so concerning," he said, contrasting Argentina
with neighboring Brazil, which is also mired in recession but
has a much higher debt load.
Moody's upgraded Argentina's credit rating to B3 with a
stable outlook from Caa1 in April, though the assessment is
still six notches below investment grade. Days later, Argentina
returned to global debt markets with a $16.5 billion bond sale
at interest rates between 6.25 percent and 7.62 percent.
Leos said that after meeting with officials from Macri's
government, which took over in December, he understood they
aimed to trim the deficit, lower inflation and boost growth.
"We differ in how fast this will occur, although that does
not necessarily impede an upgrade," Leos told Reuters. "For us
the course is more important."
Moody's said Argentina's economy would shrink 1.5 percent
this year but grow 3 percent next year, short of the 3.5 percent
the government expects. Moody's expects inflation of 20 percent
in 2017, above the 17 percent rate forecast by the government.
Torres said congressional elections slated for next year
would be key in determining whether the government could
continue to pass reforms.
(Reporting by Luc Cohen; Writing by Caroline Stauffer; Editing
by Chizu Nomiyama and Alan Crosby)