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Moody's downgrades Brazil's bond rating and outlook

Bnamericas Published: Wednesday, February 24, 2016
Moody's downgrades Brazil's bond rating and outlook

Rating agency Moody's downgraded Brazil's bond rating to 'Ba2' from the previous 'Baa3' assigned in August.

The action follows that of last week's downgrade from S&P.

Moody's also cut the ratings outlook to negative from stable.

The downgrade reflects the material deterioration of Brazil's credit metrics since August with government debt likely to exceed 80% of GDP within three years, Moody's said in a statement.

"Macroeconomic and fiscal developments over the next two to three years are expected to produce a materially weaker credit profile," the agency noted.

The negative outlook reflects the risks of further deterioration because of the slow progress by the government in achieving meaningful fiscal consolidation, said Moody's.

The approval of key reforms, such as a higher minimum retirement age, improved fiscal flexibility and reduced revenue earmarking, will be difficult given the government's limited support in congress, the agency added.

Moody's forecasts that Brazil will post an average GDP contraction of 0.5% over the 2016-8 period.

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