The American credit rating agency Fitch has lowered Argentina’s rating from B to CCC. The new rating means that an investment in the country is very risky, with a “real chance of bankruptcy”.
The reduction in Fitch follows a few days after announced crisis measures by Argentine President Mauricio Macri. The support package is needed to keep the effects of the economic crisis in the country under control. Argentina is currently going through a recession and is struggling with sky-high inflation.
The problems in the country increased further last week. The value of the Argentine currency, the peso, fell considerably in value. Where on Monday morning 45.21 pesos had to be paid for every dollar, this was 54.84 pesos at the end of the week. The most important Argentinian stock exchange also suffered: since August 9, it lost 31.5 percent in value.
The shock reaction on the financial markets came after the center-left competitor Alberto Fernández defeated incumbent President Macri in a primacy. Fernández is in favor of a more protectionist policy, with more government interference in the economy, and an end to the cuts of the current government. Macri is for a free market.
Fitch expects the Argentinian economy to shrink by 2.5 percent this year. Previously a shrinkage of 1.7 percent was expected. Furthermore, Argentina’s debt is expected to rise to 95 percent of gross domestic product.
Oliver I. Kjeldsen has a corporate finance and extensive expertise in company audit. He grants us amazing insights on taxation, international affairs and friendly advice on nearly any topic of interest. His email is oliver.kjeldsen@economicinform.com
