Fitch Ratings’ 2023 sector outlooks across Latin America remain neutral or deteriorating, with few exceptions or changes since the start of the year.
“54.3% of the forecasts for the Latin American sector are neutral in mid-2023, and 45.7% are deteriorating,” according to Fitch.
Fitch revised its outlook for the Guatemalan insurance sector to “neutral” from “improving” and for Peruvian banks to “neutral” from “deteriorating.”
Economic growth in Latin America is slowing but has been resilient, generally beating the ratings firm’s forecasts so far this year, despite global demand pressures and weak commodity prices.
Fitch Ratings recently cut its short-term prices for copper, aluminum, zinc, and thermal coal in a review of its global metals and mining assumptions.
Political risks remain high in many Latin American countries and have already taken an economic toll in Peru, Ecuador, and Bolivia.
Cascading shocks are stressing the political landscape, including the pandemic and associated rise in poverty and income inequality in 2020, an uneven recovery in 2021, high inflation in 2022, and a return to a weak growth path in 2023.
These factors increase the possibility of social mobilization, which could put pressure on public finances and the debt trajectory and lead to weaker growth and investment.
