Noting continued deterioration of the Brazilian economic situation, Moody's has again downgraded the country's issuer and bond ratings while changing its outlook to negative.
After lowering its rating to Ba3 in August 2015, the agency said the decision was driven by “prospects of further deterioration to the country's debt metrics in a low growth environment, with government debt likely to exceed 80 percent of GDP within three years”, as well as “challenging political dynamics”. Moody's expects these factors to cause a weaker credit profile in the coming years
The country's long-term foreign currency bond ceiling was changed to Ba1 and short-term foreign currency bonding ceiling was changed to NP. Long-term foreign currency deposit ceiling was changed to Ba3, and short-term ceiling to NP. Long-term local currency bond and deposit ceilings were lowered to A3.
The negative outlook, a Moody's statement said, “reflects the view that risks are skewed toward an even slower consolidation and recovery, or further shocks emerging, which creates uncertainty over the magnitude of deterioration of Brazil's debt profile over the rating horizon.”
Upgrade, the agency said, is very unlikely in the short-term given the negative outlook and expected credit deterioration. If the deterioration goes beyond the baseline scenario utilised to inform he rating downgrade, Moody's indicated further rate lowering could follow.