Fitch affirms Brazil at ‘BB’ with stable outlook

Fitch affirms Brazil at ‘BB’ with stable outlook

Ratings supported by diverse economy, strong external finances but constrained by weak economic growth potential, says agency

By Ovunc Kutlu

ISTANBUL (AA) - Fitch ratings said Thursday that it affirmed Brazil's long-term foreign currency issuer default rating at ‘BB’ with a stable outlook.

The agency said that Brazil's ratings are supported by its large and diverse economy, high per-capita income, strong external finances, deep local markets supporting financing flexibility and low foreign-currency debt share.

The ratings, however, are constrained by weak economic growth potential, low governance scores and budgetary rigidities, in addition to a high and rising government debt to GDP ratio, it added.

Fitch said it forecasts large fiscal deficits to increase general government debt from 74.4% of GDP last year to 76.8% this year.

It warned that ratings could be revised downwards if there are policy shifts that undermine fiscal credibility, financing flexibility and medium-term public debt sustainability.

Brazil's ratings, however, could see an upward revision if there is an improvement in investment and economic growth prospects in the context of macroeconomic stability and improved governance.

South America's largest economy is expected to grow 1.7% this year, down from 2.9% last year, according to Fitch's estimates.

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