Moody’s Lowers Brazil’s Credit Rating, But Doesn’t Anticipate a Double-Dip Recession

Brazil’s economy is clearly growing again after a severe recession and will be shielded from a political crisis by widespread support for the government’s reform agenda, Finance Minister Henrique Meirelles said, despite the fact Moody’s on Friday announced it was lowering the country’s credit outlook.

Meirelles said the economy recovered quickly from previous episodes of political turbulence when there was no doubt about the future of economic policy.

But Moody’s Investors Service said that the corruption scandal ensnaring President Michel Temer poses a rising threat to the recovery of Latin America’s largest economy.

Moody’s reduced the nation’s outlook to negative from stable and kept its rating at two levels below investment grade at Ba2, according to a statement on Friday. That’s a notch below Turkey and Russia. Fitch Ratings and S&P Global Ratings rank Brazil at the same level.

“The risk of prolonged political uncertainty can’t be ruled out,” Moody’s analyst Samar Maziad said in a phone interview. “There’s now a risk that the reforms could be stalled.”

While the Temer administration’s ability to deliver on initial reforms came as a positive surprise, his agenda is now at risk as the odds of an impeachment or a resignation climb, according to Maziad.

That includes plans to restore the sustainability of an overburdened social security system and increase business confidence.

Moody’s expects Brazil’s economy to grow 0.5% in 2017 after falling into its worst recession in a century last year. Maziad says the recovery may be at risk amid allegations that Temer paid off a witness in the Lava Jato corruption scandal that led to the impeachment of his predecessor, Dilma Rousseff.

“This could lead to lower growth forecasts this year and next,” she said. “Still, it’s unlikely there will be a double-dip recession or contraction.”

Mercopress

Tags:

Ads

You May Also Like

Dilma Rousseff, former president of Brazil

The Story of Brazilian President’s Impeachment Premieres at the Berlin Film Festival

“O Processo,” translated from Brazilian Portuguese as “The Trial,” is a new film about ...

A Brazilian woman on her job

Brazil President Softens Pension Reform Bill to Get Congress’s Approval

A new version of Brazil’s unpopular pension reform bill presented this week would require ...

War tanks parade in front of Palácio do Planalto, the presidential office, in Brasília

Brazil President Parades Smoke-Spewing Aging Tanks and Puts Nation to Shame

The clouds of dark exhaust spewing from aging tanks and amphibious vehicles rolling past ...

Once Again the US Is Banning Fresh Meat from Brazil

Brazil Rushes to Save Its Image After Another Ban of Fresh Meat by the US

Brazil rushed to contest a ban on fresh beef imports on Friday after the ...

For a Time, Brazil’s Samba Was a Weapon Against the Dictatorship

As the world gets into the Carnaval spirit, we look at how Brazilian music ...

Until Recently Brazil’s Most Powerful Politician, Ex House Speaker Is Now a Jailbird

Impeached Deputy Eduardo Cunha was arrested this Wednesday, October 19, in Brazilian capital Brasilia, ...

A motoboy in São Paulo delivering food

Underage Delivery App Workers Way Too Common in Brazil

Cases of children working for food delivery apps in Brazil during the COVID-19 pandemic ...

Caixa's branch at rua das Flores, in Curitiba, Paraná state

Brazil’s President Plan to Privatize Major Bank Draws Noisy Opposition

The president of the Workers Party of Brazil denounced the government’s attempt to privatize ...

Commodities on the move on the completed southern section of the BR-163 Highway - Roosevelt Pinheiro / Agência Brasil

For the Military, the Brazilian Indian Is a Savage and an Obstacle to Progress

The media portrayal of Brazil’s annual fire season — which in 2020 is trending ...