The report indicates that Chile’s credit profile stands out, first of all, for its financial and institutional “strength”. This contrasts with a level of economic diversification and GDP per capita which “lags” behind that of its peers.
The Moody’s credit rating agency maintained its A1 sovereign rating for Chile with a “stable” outlook. It is the first agency to maintain its rating since the start of the social crisis on October 18.
The report emphasizes that Chile’s credit profile stands out, first of all, for its financial and institutional “strength” in contrast to a level of economic diversification and GDP per capita which “lags” behind that of its peers.
It estimates that Chile has a growth potential of 3% over the medium term “as copper prices moderate and productivity lags”.
The analysis also indicates that “managing social demands for more inclusive growth while dealing with lower growth prospects is currently Chile’s key credit challenge.” It adds that, although public debt has risen to around 25.6% of GDP, “fiscal metrics compare favorably with those of peers.”
“The government maintains significant flexibility to respond to shocks given financial assets of around 20% of GDP,” argues Moody’s.
The agency identifies three factors as the key pillars for maintaining Chile’s rating. The first is “comparatively low government debt” and “ample access to funding” while the second and third are “significant financial flexibility” and a “long history of prudent macroeconomic and fiscal policymaking”.
As regards Chile’s weaknesses, Moody’s cites per capita income, which is “lower than that of most of its A-rated peers”, “limited economic diversification and economic dependence on commodities” and rising social demands “which will pressure government finances”.