Moody's cuts El Salvador

Moody's Investors Service said it downgraded the bond rating of the government of El Salvador to Ba2 from Ba1.

The outlook has been revised to stable from negative.

Moody's also said it unified El Salvador's foreign- and local-currency bond and deposit ceilings at Baa3.

The country compares poorly with many of its Ba-rated peers in terms of both the size and strength of the economy, as well as government financial strength, Moody's said.

Following a significant deterioration in 2009, government financial strength continued to deteriorate in 2010, but at a slowing pace, the agency said.

The increase in debt leaves El Salvador with less fiscal flexibility to undertake countercyclical policies in response to economic shocks, Moody's said.

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