Moody’s would downgrade Panama in the second half of the year

Morgan Stanley analysts predict that Moody’s will lower Panama’s risk rating by the second half of the yearas already done by Fitch Ratings.

It is no surprise to Morgan Stanley that Fitch downgraded Panama’s debt to BB+, but they admit that the decision came sooner than expected.

“We see difficulty in approving key reforms as a risk, regardless of who wins the presidency, and believe Panama will retain the risks of future downgrades,” the report said.

He also agreed with the conclusions and argumentationused by Fitch, downgrade Panama’s investment grade status.

The investment bank highlights fiscal challenges, including a weak fiscal framework, increasing public debt and high dependence on foreign markets.

As for the mine, he stresses that the future is uncertain and that a potential reopening would take time to materialize and would depend on public sentiment.

It also warns that it has not detected an effective policy response to the structural fiscal challenges that have worsened, indicating weak governance and less effective fiscal policy.

Last week, Fitch downgraded the rating from BBB- to BB+, an action that the government expected after the election.

However, the Deputy Minister of Economy and Finance, Carlos González, pointed out that technically Panama has not yet lost its investment grade because Moody’s and Standard & Poor’s have not yet changed their ratings.

For ordinary Panamanians, the loss of investment grade would lead to an increase in the interest rate of banking products, as banks will have to seek loans at a much higher cost.