The economy of Brazil is expected to shrink in 2016 causing the country’s current recession to deepen, the New York-based credit ratings agency Moody’s Investors Service said in an announcement on Tuesday.
“Moody’s forecasts that Brazil’s economy will contract further next year, reducing tax receipts for municipalities and states,” the announcement said. “Consequently, their combined debt-to-revenue ratios will rise to almost 130 percent in 2016 from 125 percent for 2015.”
Moody’s said its conclusions were based on the ratings agency’s new report that explained Brazil’s rising deficits and debt burden are the underlying reason for the negative outlook.
Tax receipts account for a significant proportion of the total revenues of Moody’s rated regional and local governments, Moody’s analyst Paco Debonnaire said in the announcement.
“And we don’t expect tax revenues to start growing again until 2017,” Debonnaire added.
Liquidity for Brazil’s regional and local governments will also remain weak in 2017, the announcement warned.