Fiscal target revision not to affect Brazil risk rating in short run

The statement was made by Moody's, which warned about the risk Brazil

Published on 16/08/2017 - 18:07 By Wellton Máximo reports from Agência Brasil - Brasília

The rise in the target for the fiscal deficit this year from $43.8 billion to $50 billion is not to affect the assessment on Brazil in the short run, credit rating agency Moody's stated Wednesday (Aug 16). In the note, the agency noted that the revision is not likely to cause an impact on the country's grade in the upcoming months, but warned about the risk Brazil's public debt may explode in the next years in case the government fails to push structural reforms further forward.

“The magnitude of the revision for 2017 doesn't change our base scenario materially,” said Moody's Senior Analyst Samar Maziad. In the text, he noted that the increase in the primary deficit in 2018 will delay the government's control over the public debt, but argued that the main risk is the non-approval of overhauls such as the pension reform.

“Our projections incorporated a primary fiscal deficit of 2.4% of the country's GDP in 2017, but our estimate for 2018 was a fiscal deficit of 1.7% of the GDP. A slower trajectory of fiscal consolidation in 2018-2020 is a negative development for credit,” Maziad added.

The revision for next year will drive the negative result for public accounts up to 2.2% of the GDP in 2018, the agency believes. Nonetheless, Maziad noted that the outlook for Brazil's grade in the short run will be more severely affected by the reforms proposed than by short-term fiscal targets.

“If approved, the pension reform will cut down the growth in government spending and contribute to the restoration of fiscal sustainability and the curbing of the increasing public debt,” he added.


Translated by Fabrício Ferreira


Fonte: Fiscal target revision not to affect Brazil risk rating in short run

Edition: Nádia Franco / Olga Bardawil

Latest news