By William Jones, Contributing Reporter
RIO DE JANEIRO, BRAZIL – Brazil’s economic outlook soured yesterday when the Central Bank announced that the country’s trade deficit is expected to reach US$80 billion in 2014, as the country’s credit risk rating suffered another downgrade by rating agency Standard and Poor’s from BBB to BBB minus on Monday.
Brazil’s banking federation said the trade deficit was more that manageable as they defied expectations of posting a loss of US$7.4 billion for the month of February, but recently upped their yearly deficit expectation from US$78 billion to US$80 billion.
The credit rating company cited “mixed signals” from the country’s government as the reason for the demotion. The risk rating by foreign agencies represents a measure of confidence of international investors in the given country’s economy.
Standard & Poor’s said in a statement that the country’s growth should remain “low” for “many years.” They said that Gross Domestic Product (GDP) expansions will come at a 1.8 percent and two percent in 2014 and 2015, respectively.
“Mixed policy signaling by the government, with negative implications for fiscal accounts and economic policy credibility, coupled with a subdued outlook for growth over the next two years continue to weigh on Brazil’s policy flexibility and performance profile,” the statement said.
The Central bank did claw back the trade deficit from US$11.6 billion in January but statistics for the year so far take the Latin American economy into the red by somewhere in the region of US$19 billion.
The new rating is in line with countries such as Spain and the Philippines, a step down from Russia and could trigger copycat moves from other creditors such as Moody’s, who last downgraded the Brazilian sovereign risk rating in October 2013, and Fitch Ratings.
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