Moody's lowers Brazil outlook as country stuck in low growth
SAO PAULO Oct 3 (Reuters) - Moody's Investors Service on Wednesday lowered its outlook on Brazil's sovereign debt rating to "stable" from "positive," as Latin America's largest economy struggles with the impact of three years of low growth, flagging investment and swelling debt.
Moody's affirmed the nation's sovereign credit rating at "Baa2," the second-lowest investment-grade ranking. The company raised the outlook on the rating to "positive" in 2011 and, late last year, took the unusual step of delaying its decision on a possible upgrade by an additional year.
The decision signals growing market concerns that Brazil's economy, which at the turn of the decade was widely thought to be entering a period of vibrant expansion, is lagging behind other emerging market countries.
"Even though there are signs that the Brazilian economy may be starting to recover, Moody's view is that, if and when the upturn materializes, it is unlikely that it will be strong enough to restore a positive trend in Brazil credit metrics," Mauro Leos, Moody's senior credit officer overseeing Brazil, said in a late Wednesday statement. (Moody's statement:)
Moody's, Standard & Poor's and Fitch Ratings currently rate Brazil at the second-lowest investment grade rating, but Moody's was until Wednesday the only of the three with a positive outlook on that rating. S&P cut the outlook on its equivalent "BBB" rating to negative from stable in June.
Yet, Leos said that, while Brazil faces a situation clearly less favorable than in recent months, there are elements that give support to the country's rating "when compared with lower-rated Baa3 peers." Some of them include the nation's relatively manageable current account deficit, its resilience to external shocks and an ongoing infrastructure investment program.
Leos said this week at a Moody's event in São Paulo that the $2.3 trillion economy remains stuck in low gear, with a growth forecast of just 2.5 percent for this and next year. This is caused by "structural challenges" such as low investment and poor infrastructure, which means any action to improve the nation's ratings will require a "long-term approach" by the government, he added.
One aspect that has for months worried credit rating companies is the deterioration in government debt trends. Brazil's public debt equals almost 60 percent of gross domestic product, compared with median ratios around 45 percent for Baa2-rated countries.
- Exclusive: Secret contract tied NSA and security industry pioneer |
- U.S. aircraft hit by gunfire in South Sudan as conflict worsens
- Four men arrested in deadly N.J. shopping mall carjacking
- With Fed out of the way, what's next on Wall Street?
- Analysis: Lost Brazil order raises threat to Boeing fighter jets