(Add Moody’s growth projections to fourth paragraph)
Sept. 1 (Reuters) – Rating agency Moody’s Investors Service downgraded Peru’s rating to “Baa1” on Wednesday, citing a “continually polarized and fractured political environment,” which it said has increased political risk and “dramatically weakened policy-making capacity “.
The outlook has changed from negative to stable, Moody’s said in a note https://bit.ly/3DDAXee.
Peruvian Congress on Friday confirmed a new left-wing cabinet appointed by President Pedro Castillo, allowing the fledgling administration to continue a program focused on higher social spending coupled with higher taxes for the mining industry.
Moody’s said it revised its forecast for real gross domestic product growth for 2021 to 12% from 9%. However, he added that the growth projections for the following years have been revised downwards as the rating agency expects private investment to remain depressed as the political landscape in Peru could lead to a downturn. business confidence.
Castillo took office a month ago after winning the presidency by a margin of just 0.25 percentage points against a rival candidate. Its far-left platform scared the markets, pushing the Peruvian Sol currency down to historic lows.
The Castillo administration has had a controversial first month, mired by allegations that some Cabinet members are aligned with a Maoist rebel group and a low 38% approval rate.
Instead, Castillo supporters say the cabinet represents historically marginalized Peruvians who do not come from the capital Lima.
(Reporting by Kanishka Singh in Bangalore; Editing by Sandra Maler)