Brazil's debt outlook improves but surplus is distant

Subject

Outlook for Brazilian debt.

Significance

With a sharp fall in interest rates since 2016 and a lower-than-expected fiscal deficit last year, Brazil's fiscal and public debt panorama improved in 2019. The public debt stock, which earlier in 2019 was projected to end the year near 80% of GDP, fell to 77.7% by end-November and is likely to have fallen further in December.

Impacts

• A primary surplus is not on the cards for this year.
• Despite an improved outlook, a 2020 improvement to Brazil's sovereign rating is possible, but far from certain.
• A return to investment grade is at least some years away.