S&P keeps Brazil’s BB- rating and stable outlook, but raises debt concerns

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Ratings agency S&P confirmed Brazil’s BB- rating on November 30, with a stable outlook. The assessment is based on the assumption that Brazil will be able to stabilize its recent increase in public debt. However, the agency warns a future downgrade is possible if Brazil fails to control public spending. 

The analysts believe expenditure pressures and higher interest rates will slow down the pace of fiscal consolidation, “with general government net debt trending toward 75 percent of GDP by 2024.” That ratio — which measures debt without factoring in the country’s reserves — currently stands at 62.57 percent of the GDP, per Central Bank data.

S&P analysts warned that Brazil’s future ratings rely on the government’s ability to control public accounts, as well as economic growth. In their view, the constitutional amendment to postpone the repayment of the administration’s IOU bonds is another sign of Brazil’s long-term problems controlling public debt

For next year, however, the agency expects moderate growth for Brazil, 0.8 percent in 2022, followed by 2.0 percent in 2023, and 2.3 percent in 2024.