S&P Affirms Brazil’s BB Credit Rating with Stable Outlook Amid Fiscal Challenges

S&P Global Ratings has reaffirmed Brazil’s 'BB/B' long- and short-term foreign and local currency sovereign credit ratings, maintaining a stable outlook. The agency also kept the country’s transfer and convertibility assessment at 'BBB-', signaling confidence that Brazil’s strong external position will continue to offset persistent fiscal pressures over the coming years.

According to S&P, Brazil benefits from a resilient economic framework supported by robust agricultural and energy exports, a freely floating and actively traded Brazilian real, and substantial international reserves. These strengths help shield the country from global economic volatility while well-developed domestic financial markets continue to provide reliable funding for both government and private-sector borrowers.

Despite these advantages, S&P expects Brazil’s fiscal position to remain under pressure. The ratings agency forecasts general government deficits of around 7% of GDP over the next several years unless authorities implement reforms to reduce budget rigidity and generate stronger primary budget surpluses. It also projects net general government debtto increase from 60.4% of GDP in 2025 to nearly 74% by 2029, while interest expenses are expected to account for roughly 20% of government revenue between 2025 and 2028.

Economic growth is also expected to moderate. S&P forecasts Brazil’s GDP growth at 1.8% in 2026, down from 2.3% in 2025, following an average annual expansion of 3.2% between 2022 and 2024. Growth could gradually improve to approximately 2.2% by 2028, supported by continued strength in agriculture and hydrocarbon production. However, relatively high real interest rates are likely to limit the pace of expansion.

The report also highlights Brazil’s political landscape ahead of the October 2026 national elections, with President Luiz Inácio Lula da Silva currently viewed as the leading contender for a second consecutive term.

Looking ahead, S&P warned that Brazil’s sovereign credit rating could face downward pressure over the next two years if fiscal policies worsen budget deficits or weaken government financing conditions. Conversely, an upgrade could become possible if policymakers implement reforms that deliver stronger long-term economic growth, improve fiscal balances, and create a more flexible budget structure capable of reducing the country’s debt burden.