Moody’s reduce Brazilian sovereign rating but stable outlook reduces chance of losing investment grade

Moody’s rating agency announced on Tuesday the downgrade of Brazil’s sovereign risk rating from ‘Baa2’ to ‘Baa3’, the lowest in the investment grade scale. Moody’s also changed the outlook from “negative” to “stable”. The market was expecting the reduction in the Brazilian rating, but there was a concern that the agency would maintain a negative outlook, which would increase the risk of the country losing its investment grade. In a report, Moody’s assessed that weaker economic performance than expected, the upward trend of government spending and the lack of political consensus on fiscal reforms will prevent the authorities to achieve high primary surpluses enough to contain and reverse the trend of debt increase this and next year.

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