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Moody’s downgrades Brazil’s banking system outlook

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Moody’s Investors Service changed the Brazilian banking system’s outlook  to negative,from stable, and affirmed the move reflects the risk that political uncertainties could cause further deterioration of banks’ financial fundamentals, especially asset risks and profitability .

Although the agency expects the continuation of the Brazilian economic recovery, supported by lower inflation and interest rate cuts, “growth will remain weak.” Moody’s forecasts the Brazilian Gross Domestic Product (GDP) at 0.5% this year and 1.5% next year. “As a result, while banks are emerging from the economic recession with manageable asset risk, we do not anticipate a material reduction in default,” he said.