BRASILIA (Reuters) – Standard & Poor’s downgraded Brazil’s credit rating deeper into junk territory on Wednesday, citing its failure to curb its fiscal deficit, in a surprise blow to President Dilma Rousseff`s bid to haul the economy out of its worst recession in decades.
S&P cut Brazil’s sovereign credit rating to BB from BB+ with a negative outlook, just five months after becoming the first agency to strip the country of its coveted investment grade. Fitch ratings followed suit in December.
Standard & Poor’s highlighted the government’s inability to plug the widening fiscal deficit amid a deepening political and economic crisis. Brazil’s economy, the largest in Latin America, is on track for its worst recession since records began in 1901, after contracting around 4 per cent last year.
“We now expect a more prolonged adjustment process with a slower correction in fiscal policy, as well as another year of steep economic contraction,” S&P said in a statement.
Brazil’s budget deficit has mushroomed since Rousseff took office in 2011. The deficit equalled 10.3 per cent of gross domestic product in 2015, nearly five times its shortfall in the 12 months to mid-2011.
