Fitch lowers Brazil outlook to ‘negative’ as crisis deepens By Reuters

© Reuters.

By Jamie McGeever

BRASILIA (Reuters) – Fitch Ratings on Tuesday lowered its outlook on Brazil’s credit rating to negative from stable, the latest indication of the severe economic and financial damage being wrought on Latin America’s largest economy by the coronavirus pandemic.

Maintaining its “junk-status” BB-minus sovereign credit rating, Fitch said Brazil’s economy is on course to shrink 4% this year with risks still tilted to the downside, and noted a rapidly deteriorating fiscal position and growing political risks.

“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 further increase public indebtedness, eroding fiscal flexibility and increasing vulnerability to shocks,” Fitch said in a news release.

The outlook downgrade comes amid a raft of downward revisions to 2020 gross domestic product growth forecasts and increasingly weak economic indicators.

Fitch’s -4% GDP forecast is in line with consensus, according to the central bank’s latest “FOCUS” survey of economists, but a growing number of forecasters, including the World Bank and International Monetary Fund, are going for -5% or more.

Figures on Tuesday showed that industrial production in Brazil plunged by 9.1% in March, taking the level of output back to where it was 17 years ago. The sector is now 24% smaller than its peak in May 2011.

Fitch expects the government’s general budget deficit, including interest payments, to widen to 13% of GDP this year, almost double the median 6.8% of GDP for countries with a “BB” credit rating.

Similarly, it expects Brazil’s overall debt-to-GDP ratio to hit 79.4% this year, up from 75.8% last year and considerably higher than the current median of 58.4% across countries with a “BB” rating.

“Given the high uncertainty of the pandemic’s duration, additional fiscal measures … cannot be ruled out,” Fitch said, adding that “challenges could arise with new spending initiatives to stimulate the economy post-crisis or an extension of the existing measures, especially in the context of limited flexibility to cut discretionary spending.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Be the first to comment

Leave a Reply

Your email address will not be published.


*