August 16, 2017 / 6:11 PM / a year ago

Moody's: Looser fiscal targets do not affect its perception of Brazil

SAO PAULO, Aug 16 (Reuters) - The Brazilian government’s decision to loosen budget targets does not affect Moody’s Investors Service perception of Brazil, an analyst at the ratings agency said on Wednesday.

In an emailed statement, senior analyst Samar Maziad wrote that the new target for a 159 billion reais ($50.3 billion) budget deficit before interest payments in 2017 came in line with Moody’s forecasts.

A revised 159 billion reais primary deficit goal for 2018, however, was wider than expected, he added. Brazil previously targeted primary deficits of 139 billion reais and 129 billion reais in each year.

“A slower fiscal consolidation path in 2018-2020 is a credit negative development,” Maziad said. “However, Brazil’s medium-term credit prospects will be impacted most by the outcome of the social security reforms.”

“If approved, social security reform would slow down the increase in government spending, contribute to restoring fiscal sustainability, and contain the buildup of public debt.”

Brazil’s weaker-than-expected economic recovery has driven tax revenues to undershoot expectations, while lawmakers have refused to back further tax hikes, forcing the government to set wider federal deficit goals through 2020.

$1 = 3.1628 reais Reporting by Bruno Federowski and Luiz Guilherme Gerbelli; Editing by Andrew Hay

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