Our rating on Venezuela reflects our
assessment that the sovereign is vulnerable to default absent unforeseen
positive financial and economic developments. Moreover, Venezuela's credit
profile reflects its monetary, exchange rate, and fiscal inflexibility and
limited external liquidity, compounded by weak institutional and governance
effectiveness. We believe that the sovereign's ability to service its debt is
under severe strain due to continued economic contraction, high inflation,
growing impoverishment, and heightened political tensions. We estimate that the
economy will contract at least 2% in 2017 in real terms, following a
contraction of around 10% in 2016 and 6.2% in 2015. Per capita GDP growth is
estimated to have been negative 4% on average during 2012-2016, a much worse
performance than most other energy-based economies. It is likely to remain
negative during 2017-2018. More…
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