"Moody's is paying close attention to trends in the country's debt-to-gross domestic product ratio and potential growth dynamics now that the economy risks posting a third straight year of sub-par growth, senior credit officer Mauro Leos said in a telephone interview on Monday.
"The focus is on growth and fiscal policy," Leos said. "If there are indications that the debt-to-GDP ratio may not continue to decline as it has been the case, based on recent numbers, then it will be more difficult to support the contention that the outlook is positive."
An outlook revision could undermine investors confidence in Brazil at a time when doubts over the sustainability of President Dilma Rousseff's economic policies are mounting. Fellow rating company Standard and Poor's on June 6 revised its outlook on Brazil's "BBB" rating to negative, citing the country's eroding fiscal and growth trends.
After expanding an average 3.6 percent over the past decade, growth in Brazil's economy slowed to 1.8 percent since 2011 in the wake of supply bottlenecks and low levels of investment. The economy grew only 0.9 percent last year.
Central bank data show net public sector debt to GDP ratio has fallen steadily in the past decade to around 35 percent.
But Leos took into account another yard stick -- gross debt to GDP. He noted Brazil's gross debt to GDP ratio has remained at around 60 percent in the past two years-- above the level of countries rated the same level".
