El Salvador ratings upgrade masks financial hurdles

Significance

The upgrade demonstrates Moody’s belief that El Salvador's immediate risk of a sovereign default has declined. Economic issues will dominate President Nayib Bukele’s second term in office, which began on June 1; he will likely present this upgrade as illustrative of his economic competence.

Impacts

• The government will curb social spending and investment further in an attempt to balance the books.
• Poverty will continue to rise, increasing risks of social unrest.
• Competitiveness will continue to be hampered by insufficient infrastructure and skilled labour shortages.