The decision by Standard and Poor’s (S&P) to lower Brazil’s BBB credit outlook to negative sends a warning signal to the government but should not materialise in a downgrade, claim analysts
Analysts participating in the ECR survey observed a steep decline in Brazil’s macroeconomic stability in the months leading up to the country being put on negative outlook from Standard and Poor’s last week, as high inflation and sharply slowing economic growth affected its country risk score.
Brazil is rated BBB with a stable outlook by Fitch and Baa2 with a positive outlook by Moody’s. This places S&P’s BBB rating with a negative outlook against the consensus of the other two agencies.
The rating agency cited weak growth reflecting modest export performance and “ambiguous policy signals” from the government that dampened investor confidence as the key reasons behind its action.
And ECR analysts appear to agree: Brazil’s economic assessment score fell by 0.5 points in the first quarter of 2013 to 61.9 (out of 100), a cumulative fall of 2.5 points on an annual basis compared with last year.