Brasília – Credit rating agency Fitch has kept Brazil’s rating at BBB, but downgraded the country’s outlook from stable to negative.
In a statement this Thursday (9th), Fitch ascribed the downgrade to “continued economic underperformance, increased macroeconomic imbalances, deterioration of fiscal accounts and a material increase in government indebtedness,” all of which are “increasing downward pressure on the sovereign credit profile.”
Fitch believes that while the government has initiated measures to increase credibility and confidence, downside risks relating to the effective implementation and durability of said measures still persist, “especially in the context of a challenging economic and political environment.” The agency adds that “additional domestic and external shocks could undermine the pace and scope of the adjustment process.”
Fitch lists reasons such as the fact that Brazilian fiscal accounts have deteriorated markedly over the past year, when the country had its “first primary deficit in several years.” According to the agency, “general government debt burden increased to 58.9% of GDP in 2014, compared to the average of 52.8% during 2010-2013.”
The assessment takes under consideration the fact that Brazil’s economy grew by only 0.1% in 2014. According to Fitch, if effectively implemented, the ongoing adjustment process could lead to a revival in confidence and growth in 2016, but growth will likely remain low.
*Translated by Gabriel Pomerancblum
