Bolivian bonanza is gone … Fitch Ratings forecast are not encouraging

Ernesto Estremadoiro reports for El Deber:

Fitch Ratings forecasts 2.8% growth rate for Bolivia in 2020

The international rating agency maintains the negative economic outlook it had released in June. In addition, the recovery is uncertain due to the fall in the volume of gas exports up to -22% and the fall in international reserves

Unfavorable are the forecasts of the rating agency Fitch Ratings for Bolivia. In its latest report, published on October 14, it maintains a negative projection for the country, which is justified by a cocktail of variables: the reduction of income from gas exports, the high level of expenditure and the fall in international reserves. The cherry of the cake, of this sweet and sour cake, is the forecast of economic growth of 2.8% by 2020. According to analysts consulted by EL DEBER, the data shows that the era of bonanza ended.

In June, the organization lowered its thumb to the country with a rating of BB- (negative outlook).

In its cold analysis, Fitch Ratings notes that international reserves fell by $1.1 billion dollars, reaching $7.8 billion dollars as of September of this year.

“The decrease would have been greater if it were not for the appreciation of gold and the appropriation of the Central Bank of Bolivia (BCB) of private funds,” the report details.

Along these lines, the rating agency says that “reserves still cover imports and liquid external liabilities widely, but have fallen below the average of GDP (18%), generating vulnerability in domestic shocks.”

The report noted that gas export volumes fell -22% as of July 2019, due to low demand from Brazil and Argentina.

In this context, the organization speaks of a recovery of the country is uncertain, due to the expiration of the contract with Brazil and the changes in the agreement with Argentina.

Fitch predicts that the reduction in revenues from gas, mining, and the slowdown in credit growth will lead to the country’s growth of 3.6% in 2019.

For next year, the projection is 2.8% of GDP.

Economist José Alberti said the report shows that the country is in decline in its macroeconomic figures.

He explained that Bolivia is currently going through a twin deficit: commercial and fiscal. He explained that the fiscal space, of the State, reaches about $3.5 billion dollars, “the result of indebtedness” made by the Government to cover the budget.

For the economist, beyond adjusting spending, exports should be promoted from the central level, through the elimination of restrictions.

Economist José Luis Evia said that due to the reduction in gas exports, Bolivia will close 2019 with a 3.3% growth, a figure that will be repeated in 2020, due to the large supply of gas in the market.

Along these lines, the Millennium Foundation reported that with the current deficit that the country is recording, public external debt would increase to $11,252 million dollars by 2020.

In recent days, several international organizations, such as the IMF, and the World Bank, lowered the growth forecast for Bolivia for this year to less than 4%. However, by 2020, the IMF expects the country to grow at least 3.8%.

Until closing, it was not possible to know the version of the Ministry of Economy on the qualification of Fitch Ratings, despite the fact that a questionnaire was sent and neither was the response of YPFB Corporation.

Published by Bolivian Thoughts

Senior managerial experience on sustainable development projects.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: