Brazil: The budget deficit is narrowing, but not enough

CHART OF THE WEEK

September’s public finance data indicated Brazil’s budget deficit stood at 7.2% of GDP (1) and that the country’s primary deficit, which excludes interest payments, stood at 1.3% of GDP. Although the trend is going in the right direction, much more is needed to stabilise the national debt. In just four years, public debt has jumped 20 percentage points to reach 77% of GDP, a heavy burden for an emerging market.

 

 

 

 

 

 

 

 

 

OUR ANALYSIS

To stabilise Brazil’s public debt levels in the medium term, the OECD (2) estimates that the country needs to run a budget surplus of approximately 2% of GDP. This would require significant efforts in the years ahead.

During his presidential campaign, president-elect Jair Bolsonaro committed to bringing the primary account back into balance in 2019 and pursuing fiscal consolidation thereafter. However, given that the general elections resulted in an extremely divided parliament, doubts hang over his ability to ensure Congress adopts his reforms.

 

GDP (1): main economic index measuring the economic production inside a given country.

OECD (2): Organisation for Economic Co-operation and Development

The opinion expressed above is dated as of 31st October 2018, and liable to change.

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