Panama, Government of — Moody’s downgrades Panama’s ratings to Baa2, changes outlook to stable

Rating Action: Moody’s downgrades Panama’s ratings to Baa2, changes outlook to stableGlobal Credit Research – 17 Mar 2021New York, March 17, 2021 — Moody’s Investors Service, (“Moody’s”) has today downgraded the Government of Panama’s long-term issuer and senior unsecured debt ratings to Baa2 from Baa1, and Panama’s senior unsecured shelf ratings to (P)Baa2 from (P)Baa1. Moody’s has also changed the outlook to stable from negative.The key driver for the rating downgrade is the very material deterioration in Panama’s fiscal strength driven by the severe economic shock from the pandemic. While most sovereigns have experienced some diminution in their fiscal strength, in Panama’s case the erosion has been unusually large relative to rating peers. Given Moody’s expectation that fiscal metrics will remain weaker than Baa peer medians for the foreseeable future, the rating agency has concluded that Panama’s sovereign credit profile has suffered a step change for the worse relative to peers and that on a comparative basis a Baa1 rating is no longer warranted.The stable outlook balances Panama’s high economic growth potential and relatively favorable funding conditions against the challenges the authorities will face in adopting policies to arrest the upward debt trend and ultimately support fiscal consolidation.Moody’s regards the coronavirus pandemic as a social risk under its ESG framework, given the substantial implications for public health and safety.Panama’s long-term…