ISTANBUL

Fitch Ratings upgraded Brazil's long-term foreign currency rating to 'BB' from 'BB-' with a stable outlook because the South American nation achieved progress on important reforms to address economic and fiscal challenges.

"Brazil's upgrade reflects better-than-expected macroeconomic and fiscal performance amid successive shocks in recent years, proactive policies and reforms that have supported this, and Fitch's expectation that the new government will work toward further improvements," the rating agency said in a statement Wednesday.

Fitch said Brazil's ratings are supported by its large and diverse economy, high per-capita income, deep domestic markets, a large cash cushion, shock-absorption capacity, a flexible exchange rate and robust international reserves.

The agency, however, warned that a deterioration in the country's domestic or external market borrowing conditions, policies that increase macroeconomic instability and undermine medium-term growth prospects could lead to a negative rating action.

Noting that inflation fell to 3.2% year-on-year in June, from 11.9% a year earlier, Fitch said it projects a real GDP growth of 2.3% for 2023 -- up from its previous estimate of 0.7%.