Government reaffirms confidence in economic resilience

Commenting on Brazil's credit rating downgrade by Fitch agency, the Finance Ministry issued a statement Thursday (Oct. 15) reaffirming its confidence in the Brazilian economy's ability to return to a growth cycle after the government budget for 2016 is approved.

The economy, according to the ministry, has responded to the fiscal adjustment measures implemented by the government in the beginning of the year. However, only by sticking to a budget with a primary surplus—a margin of saving that can be used to pay the interest on public debt—of 0.7% of Gross Domestic Product (GDP) can the stabilization continue.

The ministry also pointed out that the country has security advantages that help it address the crisis, including a significant amount of international reserves, a large and diverse domestic economy, and a recent history of economic achievements and social inclusion. However, it warned, the country can only take advantage of these features if the fiscal adjustment is implemented quickly.

“The fiscal stabilization will pave the way for recovering demand levels, stabilizing currency, and reducing risk premium with positive effects on inflation, credit, and interest. This virtuous circle can be sustained through structural measures and remedies on the supply side, if adopted concurrently, and by taking the required steps to approve the budget for 2016,” the note concluded.

In a separate statement, the Press Secretariat of the Presidency noted that despite the downgrade from BBB to BBB-, the country retained an investment grade rating. It also said that the fiscal rebalancing measures that the country has been enforcing will help stabilize public debt and revive income and employment growth in the coming years.

Finally, the secretariat pointed out that the country is among the leading foreign investment targets, ranking sixth worldwide, according to the United Nations Conference on Trade and Development (UNCTAD).

Translated by Mayra Borges