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Ratings agency Fitch has cut Brazil’s sovereign debt rating deeper into junk territory on Thursday.
The agency downgraded ratings on Brazil’s senior unsecured foreign- and local-currency bonds to ‘BB’ from ‘BB+’ and maintained a negative outlook.
The agency said:
The downgrade of Brazil’s ratings reflects the deeper-than-anticipated economic contraction, failure of the government to stabilize the outlook for public finances and the sustained legislative gridlock and elevated political uncertainty that are sapping domestic confidence and undermining governability as well as policy effectiveness.
And on its outlook, Fitch said:
The maintenance of the negative outlook reflects continued uncertainty surrounding the progress that can be made to improve the outlook for growth, public finances and the government debt trajectory.
Fitch also downgraded its growth forecasts for the economy. It now expects Latin America’s biggest economy to contract by 2.8 per cent this year, down from its previous estimates for a 2.5 per cent decline. In 2017, the economy is expected to grow 0.5 per cent, from its previous estimates for 1.2 per cent growth.
Brazil has been downgraded to junk by all three major ratings agencies and the economy is in the midst of its worst recession in more than a century.
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