Fitch Ratings lowered Brazil's long-term foreign and local currency issuer default ratings to BB- from BB due to the country's fiscal deficits and growing government debt burden.

"Brazil's fiscal deficits remain large and are expected to decline only gradually. The government over-performed its primary deficit target for 2017," the rating agency said, though it projected the general government deficit would average just over 7% of GDP from 2018 to 2019, after reaching more than 8% last year.

Meanwhile, Brazil's general government debt was forecast to reach 80% of GDP by 2019 before rising further, from 74% in 2017.

The ratings downgrade also reflected the Brazilian government's failure to legislate reforms, including a pension reform bill, which would improve the structural performance of public finances.

"The decision of the government not to put the social security reform to a congressional vote represents an important setback in the reform agenda that undermines confidence in the medium-term trajectory of public finances and the political commitment to address the issue," Fitch said, adding that the shelving of the measure increases fiscal challenges for the next administration.

Fitch also revised Brazil's outlook to stable from negative, as it projected economic growth would average 2.6% from 2018 to 2019, up from 1% in 2017.

"Growth should be supported by the favorable external demand conditions as well as a recovery in domestic demand. However, the strength of the growth rebound could be constrained by political, fiscal, and reform uncertainties," said Fitch, which expected the October presidential and congressional elections to add to uncertainty.