UPDATE 1-S&P downgrades Venezuela's sovereign credit rating to B
NEW YORK, June 17 (Reuters) - Standard & Poor's on Monday downgraded the sovereign foreign currency credit rating for Venezuela to B from B-plus, citing political turmoil as an impediment to enacting meaningful reforms in order to stop a slide in economic activity.
S&P's move on the OPEC nation brings it in line with Moody's Investors Service's current rating of B2, while Fitch Ratings remains one notch higher at B-plus. Both Moody's and Fitch have negative outlooks on the credit.
"Growing political uncertainty is weakening the implementation of economic policies and may possibly undermine governability," S&P said in a statement. The outlook on the credit is negative, meaning another downgrade could occur between 6 months to two years.
S&P said the narrow election victory of President Nicolas Maduro, the ensuing challenge by opposition lawmakers and signs of internal government disagreement make it more difficult to contain inflation and ease inflationary pressures.
"GDP (gross domestic product) growth is decelerating sharply in 2013, and we expect it to approach zero. Inflation is increasing and may reach close to 40 percent by year-end," S&P said.
"Growing restrictions on external liquidity as a result of PDVSA's lower oil production and a more uncertain outlook for oil prices will continue to limit Venezuela's ability to deal with growing domestic political and economic challenges," it added.
Last week Venezuela's election council confirmed its audit of votes from April's election, declaring Maduro won by 1.5 percentage points over opposition leader Henrique Capriles.
Maduro succeeded the late socialist leader Hugo Chavez, whose personal style of politics gave birth to the Chavismo movement that showered state money on the nation's poor and led to wholesale expropriation of private industries and property.