Fitch Revises Brazil Rating From Stable to Negative
World Economy

Fitch Revises Brazil Rating From Stable to Negative

The international rating agency Fitch revised the rating outlook on Brazil’s long-term foreign and local currency Issuer Default Ratings (IDRs) to negative from stable, it reported Thursday.
Fitch also affirmed the IDRs at “BBB”. The issue ratings on Brazil’s senior unsecured foreign and local currency bonds are affirmed at “BBB”. The Country Ceiling is affirmed at “BBB+” and the short-term foreign currency IDR at “F2”, Tass reported.
Brazil’s continued economic underperformance, increased macroeconomic imbalances, deterioration of fiscal accounts and a material increase in government indebtedness are increasing downward pressure on the sovereign credit profile, Fitch said.
“While the government has begun a macroeconomic adjustment process to boost policy credibility and confidence, downside risks related to its effective implementation and durability persist, especially in the context of a challenging economic and political environment,” the report said, adding that additional domestic and external shocks could undermine the pace and scope of the adjustment process.
The Brazilian economy grew by 0.1% in 2014 and is forecast to contract by 1% in 2015, according to Fitch. The country’s three-year growth average of only 1.5%, compared to the “BBB” median of 3.2%, highlights the structural nature of the under-performance. The macroeconomic adjustment process currently underway, if effectively implemented, could lead to a revival in confidence and growth in 2016 and beyond but growth will likely remain below that of rating peers, the report said. Medium-term growth prospects would largely depend on the government’s ability to reverse the downshift in confidence and improve the competitiveness of the economy by making progress on microeconomic reforms.

  Government Deficits
Fitch says general government deficits will remain elevated in 2015-2016 (averaging 5% of GDP) due to difficulties in achieving the primary surplus targets and increased interest-service burden. Moreover, economic recession in 2015 and a subdued recovery next year will continue to put upward pressure on the general government debt trajectory even under the assumption that the Brazilian Treasury does not extend additional loans to BNDES (the Brazilian development bank).
Economic under-performance, difficulty in implementing fiscal measures in a timely manner, and materialization of contingent liabilities represent downside risks for government debt dynamics, the agency said.
Brazil’s economic diversity, relatively developed civil institutions, a strong shock-absorption capacity underpinned by a robust international reserves position, a net sovereign external creditor status, and an adequately capitalized banking system support its credit profile, Fitch said, adding that the government’s debt composition has improved in recent years, reducing currency and interest risks, and the sovereign maintains market access.


Short URL : http://goo.gl/4cjnti

You can also read ...

Sanctions Boost Qatar’s Food Prices, Hurt Real EstateFood and beverage prices gained 4.2% from the previous month.
Sanctions imposed by Persian Gulf Arab states are continuing...
Inside view of Tokyo Stock Exchange
Stock markets around the world remained buoyed Tuesday by a...
Hanjin has so far raised only $220 million towards repayments to more than 180 creditors.
South Korea’s Hanjin Shipping, which faces credit claims...
HSBC, IBM to Develop Cognitive AI
HSBC is working towards the introduction of artificial...
Australia Bank Reveals Further Woes
Australia’s biggest bank has admitted failures costing staff...
China Bans Imports From North Korea
China has announced a ban on imports of coal, iron ore, lead...
The Bank of Portugal sees 2.5% growth this year.
Portugal’s economy grew 2.8% in the second quarter from the...
Singapore  Exports Rising
Singapore’s non-oil domestic exports in July likely rose from...