Narayan AmmachchiU.S. ratings agency Standard & Poor has raised Paraguay’s credit rating from BB- to BB and noted that the country’s infrastructure development programs should fuel economic growth.
The BB rating, two steps below investment grade, signifies a stable outlook, S&P said in a statement today. According to Bloomberg, the move puts Paraguay’s classification in line with Hungary and Bolivia and one level above Vietnam.
Given S&P’s estimation, Paraguay’s economy is set to expand between 4.5% and 4.8% annually over the next three years. The South American nation’s economy grew at a staggering 13.6% last year.
“The Administration will be able to maintain political consensus for its growth strategy and progress on the implementation over the coming three years, setting the stage for gradual economic diversification and reduced economic volatility,” said the ratings agency in a statement.
Rating agencies appear to be increasingly optimistic about Paraguay’s economic growth. In February this year, Moody’s upgraded Paraguay’s government bonds from Ba3 to Ba2, while Fitch Ratings changed its outlook from ‘stable’ to ‘positive’.
It seems recent legislation – such as a law on Public Private Partnership (PPP) and the Fiscal Responsibility Act – persuaded S&P to raise Paraguay’s credit ratings. The South American country has also amended its Anti-trust law to promote market competition and discourage abuse of dominant positions through predatory pricing.
A recent World Bank report has projected Paraguay’s economy to grow by 4.3% in 2015 and another 4% in 2016.
Earlier this year, the Heritage Foundation index ranked Paraguay as the 78th freest economy, in the same category with countries such as Uruguay and Peru.
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