The bank also maintained the country's sovereign rating at "BBB" given the Andean country's solid external liquidity, a history of macroeconomic stability and a disciplined policy framework.
Fitch on Tuesday upgraded Peru's debt rating outlook to "stable" from "negative," while maintaining the country's sovereign rating at "BBB," amid solid policies that have supported economic recovery this year from a recession and preserved broad macro-financial stability.
"In Fitch's view, political uncertainties remain elevated, however, and are constraining the recovery of private investment, which we expect will keep growth relatively weak at around 2.5% over the next two years," the agency said in a report.
"Fitch believes that fiscal management has weakened and that fiscal targets could continue to be missed, but despite this gap, debt relative to GDP is projected to remain relatively stable at low levels," it added.
According to the rating agency, Peru's "BBB" rating is also supported by solid external liquidity, a history of macroeconomic stability and a disciplined policy framework.
Reduced political volatility
The rating agency says the executive and legislative branches remain locked in “an uneasy stalemate.” Furthermore, despite the threat of impeachment , President Dina Boluarte has remained in office due to her alliance with some right-wing parties. “In Fitch’s view, the alliance increases the likelihood that Boluarte and Congress will serve out their terms until July 2026, absent pressure from renewed social unrest. However, the political balance remains fragile and could be maintained after the 2026 general elections. This could prolong current governance challenges. Peru’s composite World Governance Indicators (WBGI) fell 8.7 percentage points to the 37.9 percentile from 2019 to 2023,” it says.
The firm also highlights Congress' approval of the pension reform that creates a four-pillar system, adding semi-contributory and voluntary regimes to the existing contributory and non-contributory pillars. "It prohibits pension withdrawals, which could allow the private pension system to slowly recover assets after seven withdrawals since 2020 totaling 10.7% of GDP (more than half of its assets). The reform will entail a fiscal cost, but quite moderate according to initial estimates of around 0.1%-0.5% of GDP in the medium term," it says.
