Credit rating agency Moody's this week raised the outlook of Brazil's sovereign rating from negative to stable.
In a statement, Moody's said it made the revision mainly because of the higher-than-expected short and medium-term economic growth prospects in the country as well as the expectation that the winner of this year's election in October will approve fiscal reforms to cut government spending.
In short, Moody's believes that the downside risks to growth and uncertainty regarding the reform momentum that led to the assignment of the negative outlook to the Ba2 rating in May of last year have receded, Moody's said.
Moody's expects the incoming administration to resume efforts to approve further reforms that will be needed, in particular to social security, to comply with the constitutionally-mandated spending ceiling, the statement said.
According to Moody's forecasts, the Brazilian fiscal deficit should gradually decline from 7.8% of Gross Domestic Product (GDP) in 2017 to 7% of GDP in 2018 and 2019 respectively.