Itaú BBA - Primary deficit of 16.9 billion reais in August

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Primary deficit of 16.9 billion reais in August

September 28, 2018

Short-term fiscal results are better than expected


For the version with all charts and tables, please open the attached pdf file 
 

The consolidated public sector posted a primary deficit of 16.9 billion reais in August, which was better than our expectation (-24.1 billion) and market consensus (-19.0 billion). Regional governments had a surplus of 3.4 billion reais (we expected a deficit of 0.5 billion), while state-owned companies had a surplus of 0.6 billion reais (we estimated a flat reading). In addition to better figures for regional governments and state-owned companies, the main surprise vs. our forecast involved extraordinary revenues from the 15th round of oil and gas concessions, which we expected to be registered only in September. The consolidated primary deficit accumulated over 12 months widened to 1.2% of GDP in August from 1.1% in July. The latest monthly reading confirms the outlook for a better primary result than the target set for the deficit in 2018.

The general government’s gross debt rose to 77.3% of GDP in August from 77.2% in July, even after the development bank BNDES returning the equivalent of 1.0% of GDP to the National Treasury. Due to FX depreciation, the public sector’s net debt declined to 53.2% of GDP in August from 54.2% in July. A favorable fiscal scenario depends strictly on the approval of reforms (such as the pension reform) that would signal a gradual return to primary surpluses that are compatible with structural stabilization in public debt.

 

Pedro Schneider

 

For the version with all charts and tables, please open the attached pdf file 



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