Moody’s has raised the long -term credit grade in foreign and place from Argentina from CAA3 to CAA1 amid the series of economic reforms implemented by President Javier Milei’s government. The agency also changed the positive perspective for stable.
The classification reflects the liberalization of the exchange rate, the cooling of capital controls and a new program with the International Monetary Fund (IMF), which support liquidity availability and reduce external financing pressures, according to the institution. These factors decrease the likelihood of a negative credit event, says Moody’s.
Balanced prosecutor
In the statement, Moody’s projects that the Argentine economy will grow 4% this year, before slowing to 3.5% in 2026. The agency, however, highlights increasing risks to projections.
Continuous disinflation led to increases in actual salaries, while the fiscal squeeze extended the volume of credit no longer supplanted by public sector loans, according to the institution.
“The balanced fiscal position represents a break with the long history of tax dominance of Argentina and deficit financing by the Central Bank, suggesting that the current recovery will probably be longer lasting,” he says.
Moody’s explains that the disassembly of gearbox distortions is improving local market functioning in various sectors. At the same time, the transition to the new regime did not cause substantial volatility in markets or economic activity, which relieved a point of vulnerability that had been pressuring the sovereign note, according to the analysis.
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As a result, the growth of Gross Domestic Product (GDP) has returned to the positive territory in the last three months of 2024, after six consecutive quarters of annual contraction.
Moody’s has said it could return to rating from Argentina if structural reforms continue to alleviate economic and tax imbalances.
The sovereign note can also be supported by an increase in international reserves induced by foreign currency flows that do not generate debt, according to the agency.
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“Economic recovery and popular support for government adjustment policies before legislative elections in October can grant the government a stronger political mandate to accelerate their agenda of economic reforms,” he says.
On the other hand, Moody’s could lower the rating if signs of pressures or foreign currency scarcity appear.
“Political or economic shocks that compromise macroeconomic stability or cause increased financial volatility, interrupting progress in macroeconomic stabilization, can also result in a demotion of classification,” he says.
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Challenges
Although it has raised Argentina’s credit classification, Moody’s estimate that the country still faces challenges in external financing, facing weak capital mattresses and investment obstacles. The factors press the Argentines’ Sovereign Note, according to the agency.
The distance of three steps between the ceiling of the local currency and the sovereign rating reflects the growing predictability of economic policy and the reduction of the state presence in the economy, in contrast to the instability of the external payment balance, according to the analysis.
“The difference in a level between the ceiling of foreign currency and the ceiling of local currency reflects the greater effectiveness of policies and relatively low external indebtedness, offset by the low opening of the capital account,” he says.
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Another major risk classification agencies in the world, Fitch had already climbed the evaluation of the neighboring country in May, from CCC to CCC+.
At the time, the agency’s statement stressed that economic recovery and disinflation exceeded expectations and should receive an additional boost with recent policy changes, such as a new currency regime. Among the uncertainties cited was the low level of currency reserves, which are not guaranteed by the new regime.
