SANTIAGO, Aug 25 (Reuters) - Moody’s downgraded Chile’s outlook to negative on Tuesday due to economic hits from the coronavirus pandemic and social pressures, but the ratings agency maintained its A1 rating.
Moody’s said the world’s largest copper producer’s debt-to-GDP ratio has been rising since 2010, a trend that has accelerated since 2014. It said it now expects the ratio to rise from 21% in 2016 to 39% in 2021, constituting a “key credit concern”.
It said social protests over inequality that started in October 2019 and the global coronavirus pandemic and associated economic shock would put pressure on Chile’s commitment to fiscal prudence.
“For Chile, the shock transmits mainly through weaker economic growth and increased demands for social programs that could translate into a larger spending base relative to government’s revenue over time,” it said. “Shifts in policy priorities due to social tensions may also erode policy effectiveness, a source of credit strength historically.”
Both Fitch and Standard & Poor’s downgraded Chile’s outlook to negative in March and April respectively. (Reporting by Aislinn Laing; Editing by David Gregorio)
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