SAO PAULO, June 14 (Reuters) - S&P Global Ratings on Wednesday revised its outlook for Brazil to "positive" from "stable," saying that improved fiscal and monetary policy outlooks could boost the South American country's low growth levels.
The decision by the ratings agency is a major boost for leftist President Luiz Inacio Lula da Silva, who returned to office in January amid fears he would lack fiscal discipline and expand the role of the state.
News of the decision lifted Brazil's real currency, which rose more than 1% against the dollar in its fourth consecutive positive session. The Bovespa stock index closed 2% higher at its highest level since October.
The ratings agency said continued growth, combined with a new fiscal framework, "could result in a smaller government debt burden than expected, which could support monetary flexibility and sustain the country's net external position."
Finance Minister Fernando Haddad welcomed the news, saying Latin America's largest economy is showing a great capacity to show positive results.
"The dollar is falling, the GDP is growing, inflation is under control, and Brazil's rating is improving in the eyes of the world," Haddad said on Twitter.
The country's proposed fiscal framework, yet to be approved by the Senate, establishes a limit on real growth for public spending, aiming to address public debt concerns. Senators are still negotiating a final format for the new rules.
Treasury Secretary Rogerio Ceron expressed confidence that the approval of new fiscal rules and tax reform will lead to an improvement in the country's rating by all agencies.
Along with the continuation of the measures planned by the government's economic team, the S&P decision will pave the way for the recovery of the country's investment grade by 2026, Ceron told Reuters, adding that it would boost the government's agenda.
The ratings agency also affirmed its 'BB-/B' long and short-term foreign and local currency sovereign credit ratings on Brazil. (Reporting by Peter Frontini in Sao Paulo and Marcela Ayres in Brasilia; Editing by Anthony Esposito, Lisa Shumaker and Paul Simao)
