Research Update: Costa Rica Long-Term Ratings Lowered To 'B+' On Worse Debt And External Risk; Outlook Is Negative

Foreign currency: B+/Negative/B Local currency: B+/Negative/B Transfers&Convertibility: BB We expect that Costa Rica's general government fiscal deficit will hover around 5%-6% of GDP in the next two years despite the recent approval of fiscal reform, contributing to a steady increase in its debt burden. A high debt burden, poor debt management, a rising share of government debt denominated in foreign currency, and a persistently high level of dollarization in the financial sector highlight Costa Rica's external vulnerabilities. We are lowering our long-term foreign and local currency ratings on Costa Rica to 'B+'. The negative outlook reflects an at least one-in-three chance of another downgrade in the next six to 24 months based on greater-than-expected erosion of the government's

...+ We expect that Costa Rica's general government fiscal deficit will hover around 5%-6% of GDP in the next two years despite the recent approval of fiscal reform, contributing to a steady increase in its debt burden. + A high debt burden, poor debt management, a rising share of government debt denominated in foreign currency, and a persistently high level of dollarization in the financial sector highlight Costa Rica's external vulnerabilities. + We are lowering our long-term foreign and local currency ratings on Costa Rica to 'B+'. + The negative outlook reflects an at least one-in-three chance of another downgrade in the next six to 24 months based on greater-than-expected erosion of the government's debt burden or signs of weakening access to liquidity due to external shocks or poor debt management....

Research Update