Fitch: Economic, Fiscal and Political Risks Drove Brazil’s Loss of Investment Grade

The December 2015 downgrade of Brazil’s sovereign rating to speculative grade (‘BB+’/Negative Outlook) reflected a deeper economic recession, adverse fiscal developments, rising government debt burden, and increased political uncertainty that eroded Brazil’s investment grade rating underpinnings, says Fitch Ratings in a new special report. The Negative Outlook highlights continued downside risks surrounding these developments. Brazil’s economic recession could be deeper and more protracted than previously forecast. Medium-term prospects remain weak, with a meaningful pick-up in growth only likely once the political environment stabilizes. At the same time, fiscal performance continued to deteriorate in 2015, while repeated changes in fiscal targets hurt policy creditability.

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