Fitch Ratings downgraded Brazil’s rating outlook citing deterioration in economic and fiscal prospects amid renewed political uncertainty.
The agency affirmed the ratings at ‘BB-’ and downgraded the outlook to
‘negative’.
Fitch observed that Brazil entered the current period of stress with a
relatively weak fiscal balance sheet and low economic growth. The
pandemic and the related recession will put further pressure on public
debt.
Nonetheless, Brazil’s ratings were underpinned by its large and diverse [economy][1], high per capita income relative to peers and a capacity to absorb external shocks, the agency noted.
The economy is forecast to shrink 4 percent this year before rising 3 percent in 2021 as it recovers from the pandemic. In Fitch’s view, a faster recovery in 2021 may be hindered by the lingering fiscal, political and reform uncertainties in the context of increased public indebtedness.
The agency forecasts general government debt to reach 89.4 percent of GDP in 2020 compared to the current ‘BB’ median of 58.4 percent.
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