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![The benchmark Sao Paulo stock exchange fell 2.2 per cent on the news of the rating cut [Xinhua]](http://thebricspost.com/wp-content/uploads/2015/11/246495194_8-e1448040186234.jpg)
The benchmark Sao Paulo stock exchange fell 2.2 per cent on the news of the rating cut [Xinhua]
Citing a negative investment outlook, a deterioration in Brazil’s credit metrics, and political turmoil, Moody’s reduced the country’s sovereign rating by two steps to junk, or Ba2.
Moody’s decision sent the Ibovespa Brasil Sao Paulo Stock Exchange Index down 2.21 per cent to 41,582 at noon local time.
The downgrade comes amid a week of bad news for President Dilma Rousseff who continues to struggle to push through fiscal austerity.
A Brazilian government plan to cut spending by 23.4 billion reais (about $5.8 billion) this year failed to affect a negative assessment by experts that economic forecasts would be revised downward.
According to a Central Bank survey, Brazil’s economic contraction this year was revised from 3.3 to 3.4 per cent.
The Banco Central do Brasil (BACEN) – has since January several times revised downward the 2016 economic growth rate.
In early January, the forecast held at 2.95 contraction.
The difference reflects Brazil’s recession for much of 2015 during which the economy contracted by 3.75 per cent.
Brazil’s economy grew just 0.10 percent in 2014.
Analysts say that the economy is at its weakest since before World War Two.
The BRICS Post with inputs from Agencies
