S&P Global Ratings on Dec. 11 revised its outlook on Brazil's long-term ratings to positive from stable amid prospects for a stronger fiscal profile over the medium term.

The outlook reflects prospects for an upgrade to Brazil's credit ratings, which the agency affirmed at BB-/B, if further progress on the government's fiscal and growth agenda leads to a faster reduction of the country's fiscal deficits and a stabilization of its debt dynamics.

The rating agency cited the country's pension overhaul, expectations of progress in other growth measures and a domestic demand-driven economic expansion as factors that could lift Brazil's fiscal position in the next three years. The Brazilian central bank's recent easing measures also gave the government more room to stabilize its debt burden, the agency added.

S&P Global Ratings projects Brazil's GDP growth to drop to 1% in 2019 from 1.3% last year, before rebounding to 2% in 2020. The general government deficit is forecast to fall to 5.9% of GDP in 2019 from 7.1% in 2018.

Despite lower fiscal deficits, Brazil's indebtedness is likely to worsen through 2022, with general government debt net of liquid assets expected to hit 61% of GDP in 2019, up from 57% in 2018.

The rating agency also flagged risks related to executing the pension reform on the back of Brazil's polarized political environment.

The country's outlook could be revised back to stable if the agency sees policy or economic developments that harm the potential of lower government deficits and limit medium-term growth prospects.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.