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S & P Assesses Brazil’s Fiscal Position Remains Weak

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Risk rating agency Standard & Poor Global Ratings said on Thursday that Brazil’s fiscal position remains weak in view of a scenario with considerable fiscal deficits and large indebtedness. She says she expects President Jair Bolsonaro’s government to propose a comprehensive pension reform to contain the increase in government compulsory spending with the intention of facilitating compliance with the spending ceiling.

In addition to moderate growth prospects, Brazil’s fiscal position is another of the main weaknesses of the credit note. Its fiscal trajectory is of still large deficits, albeit in decline, and increased indebtedness by 2022, in the S & P assessment. The agency says it expects the central government’s primary deficit to fall from 7.1 percent of gross domestic product in 2018 to 6.7 percent of GDP this year, and then to 5 percent in 2022. This is consistent with our assuming a slow reduction in the government’s primary deficit by an average of 0.7 percentage point between 2019 and 2021, and will move to a balanced position in 2022.

Regarding the external accounts, which, according to S & P, remain solid, the agency projects that the current account deficit will increase from 0.8% of GDP in 2018 to 1.2% of GDP this year and later to 2.6% in 2022.