Macroeconomic Stability and Resilience Are the Main Factors for Guatemala’s Credit Rating

S&P Global Ratings upgraded Guatemala's credit rating from BB-, with a positive outlook, to BB with a stable outlook in its report on April 11th.

by Domenika Reyes

Guatemala City, by Brenda Larios -AGN-. The international credit rating agency, S&P Global Ratings, raised Guatemala’s credit rating due to the country’s macroeconomic stability and resilience.

The credit rating for Guatemala was upgraded from BB- with a positive outlook to BB with a stable outlook and was published in S&P’s report on Tuesday, April 11th.

The decision was mainly based on the resilience and macroeconomic stability of the Guatemalan economy.

Considered Aspects 

The rating agency considered relevant aspects of the country’s economy that constitute credit enhancement. These include a solid external position, moderation of public debt relative to Gross Domestic Product -GDP-, and a cautious monetary policy.

Furthermore, the agency notes that tax revenue has strengthened over the past two years. Therefore, the tax burden on GDP increased from 10.7% in 2019 to 12.1% in 2022 due to improvements observed in tax administration.

Meanwhile, the stable outlook reflected in the rating shows the expectation that conservative macroeconomic management will continue to prevail in the short and medium term.

This, notwithstanding unfavorable external conditions and the upcoming general elections on Sunday, June 25th.

The agency also indicates that Guatemala’s monetary policy continues to reflect the mandate of the Central Bank focused on inflation control and its operational independence. This has materialized in a 300 basis point increase in the monetary policy interest rate since May 2022, which allows the annual inflation rate to converge to the central point of its target by the end of 2024.

The Goals

The report states that Guatemala’s credit rating could improve in the short and medium term if the political environment and implementation of favorable economic policies increase investor confidence.

As a result, it would generate gradual progress in strengthening the country’s regulatory and legal framework to reduce uncertainty and strengthen the rule of law.

Those actions would ensure the continuity of economic, financial, fiscal, and investment efforts for the country’s progress.

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