RIO DE JANEIRO, BRAZIL – Shelly Shetty, Fitch’s co-director of sovereign ratings for the Americas, said maintaining fiscal credibility and progressing with structural reforms is critical to changing the adverse outlook given Brazil’s “BB-” rating in May last year.
“Our projections are for a dramatic reduction in the budget deficit to 7% of GDP this year [from 14% in 2020], and these incorporate the full removal of fiscal stimulus and maintenance of the spending cap,” Shetty said during a webinar held by the agency on the outlook for Latin American countries this year.
She said that should the emergency aid be extended, the budget deficit will obviously rise and it would be important to see how the government would accommodate this within the spending cap. That is, if the cap would be relaxed, if there would be countervailing measures or if the state of calamity would be extended, thereby enabling full non-compliance with the cap this year.