Brazil 'BB/B' Sovereign Ratings Affirmed; Outlook Remains Negative

OVERVIEW The considerable fiscal and economic challenges in Brazil imply the need for a steadfast policy commitment. Despite progress on a medium-term fiscal correction under the Temer Administration, lingering political uncertainties, heightened fiscal pressures from local governments, and a weak economy imply a slow, prolonged adjustment. We expect the economy to post low growth over the next several years, after a significant drop in real GDP since 2014, the general government deficit to average over 7% during 2017-2019, and net general government debt to rise toward 67% of GDP by 2019. We are affirming our long-term foreign and local currency sovereign credit ratings at 'BB', and our short-term foreign and local currency sovereign credit ratings at 'B'. The negative outlook

...OVERVIEW + The considerable fiscal and economic challenges in Brazil imply the need for a steadfast policy commitment. Despite progress on a medium-term fiscal correction under the Temer Administration, lingering political uncertainties, heightened fiscal pressures from local governments, and a weak economy imply a slow, prolonged adjustment. + We expect the economy to post low growth over the next several years, after a significant drop in real GDP since 2014, the general government deficit to average over 7% during 2017-2019, and net general government debt to rise toward 67% of GDP by 2019. + We are affirming our long-term foreign and local currency sovereign credit ratings at '##', and our short-term foreign and local currency sovereign credit ratings at 'B'. + The negative outlook reflects the risk that the government's strategy to stabilize the economy and its fiscal position could be undermined by fluid political dynamics following three years of recession and by potential fallout...

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