Brazil Shows Growing Perception of Fiscal Insolvency, GS Says
(Bloomberg) -- Local sentiment “distinctively negative” given the deteriorating macro, political and social environment, Goldman Sachs senior economist Alberto Ramos writes in a report.
- Growing local perception that Brazil is on “trajectory that could eventually lead to fiscal insolvency over the medium- term, and the main concern is that the authorities are yet to show either strong willingness or political strength to deal successfully with these growing challenges”
- As the recession continues and credit conditions tighten, more visible drop in credit quality is likely, potentially damaging the overall financial system and the economy
- Most analysts view BRL now slightly cheap to fundamental fair value, still expect the BRL/USD to depreciate further (moderately) in 2016, to around 4.30-4.40
- Local analysts say larger currency depreciation shock, to 4.50 and above, possible given volatile domestic macro and political environment, “haphazard and inadequate policy response to the challenges ahead, particularly on the fiscal front”
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HALISTER1Source: BFW (Bloomberg First Word)
People Alberto Ramos (Goldman Sachs Group Inc/The)
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