(Adds comment from Fitch analyst, background)
SAO PAULO, July 23 (Reuters) - Fitch Ratings said on Thursday it will reevaluate Brazil’s fiscal trends, which are key for its decision on whether to downgrade the country’s credit ratings, after the government slashed its budget savings targets for this year and next.
Brazil’s new fiscal savings goals are below what Fitch had estimated in April, when it decided to slap a negative outlook on the country’s BBB credit rating, Fitch analyst Shelly Shetty said in a statement.
A negative outlook signals the rating may be downgraded over a period of 12-18 months.
Brazil dramatically lowered its fiscal savings goals for 2015 and 2016 on Wednesday due to plunging tax revenues, while announcing new spending cuts to underscore its commitment to austerity amid a steep economic downturn.
“The recent downward revision of the primary surplus target ... for 2015 highlights the difficulties of consolidating amid a recession,” Shetty said, adding that Brazil’s fiscal performance “has continued to be affected by the challenging economic environment.”
The Brazilian real slumped nearly 2 percent on Thursday as investors fear Brazil’s fiscal problems could cost it its coveted investment-grade rating.
Both Fitch and Moody’s Investors Service rate the country two notches above junk territory. Standard & Poor’s has the country at BBB-minus, its lowest investment-grade rating. (Reporting by Walter Brandimarte; Editing by Bernadette Baum)