Guatemala Outlook Raised by S&P on Improving Growth, Tax Revenue

Guatemala’s credit outlook was raised by Standard & Poor’s on the country’s economic growth prospects and increased revenue that will help narrow the budget deficit.

The outlook on Central America’s largest economy was raised to stable from negative on expectations the government will reduce fiscal deficits to about 2.5 percent of gross domestic product from 3 percent over the next three years, S&P said in a statement today. New tax legislation and improved economic growth prospects will help the government improve on low revenue and high infrastructure and security needs, according to the statement.

“The expected improvement in economic growth and fiscal revenues should diminish the downside risks for Guatemala at the current rating level,” analyst Sebastian Briozzo wrote in the report.

Guatemala is rated ‘BB’ by S&P, two levels below investment grade and in the same category as Portugal and Turkey. The economy expanded 3.4 percent in the first quarter, up from 3.3 percent in the final three months of 2011, the central bank said.

Guatemala’s 10-year dollar bonds, the country’s first global notes since 2004, have returned 14 percent since they were sold on May 31.

To contact the reporter on this story: Adam Williams in San Jose, Costa Rica at awilliams111@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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