MOSCOW (Sputnik) – The Fitch rating agency has downgraded Brazil’s long-term foreign and local currency Issuer Default Ratings (IDRs) from BB+ to BB, citing economic contraction.
"Near-term growth prospects continued to weaken since Fitch's downgrade of Brazil to 'BB+' in December 2015. The agency now forecasts that growth will reach —3.8% in 2016 and 0.5% in 2017, down from the December forecast of —2.5% and 1.2%, respectively," Fitch said on Thursday.
Fitch’s rating outlook on Brazil’s long-term IDRs remains negative, 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," Fitch explained.
Brazilian President Dilma Rousseff has been facing a wave of public discontent for over a year amid Brazil’s struggling economy and a major corruption scandal in the state-owned Petrobras petroleum company. The opposition has accused the president of corruption and of violating financial rules by manipulating state bank accounts to close budget gaps.
In April, two-thirds of Brazil's lower house lawmakers voted in favour of impeaching Rousseff. Brazil’s Senate is due to vote on holding an impeachment trial on May 11.
