Itaú BBA - Primary deficit of BRL 13.4 billion reais in August

Macro Brazil

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Primary deficit of BRL 13.4 billion reais in August

September 30, 2019

Fiscal challenges remain.

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  The consolidated public sector posted a primary deficit of BRL 13.4 billion in August, better than our forecast and market consensus (-17.1 billion and -15.5 billion, respectively). The central government had a deficit of BRL 16.8 billion under the National Treasury’s methodology (which considers the gap between revenues and expenses), better than our -18.0 billion estimate. Under the Central Bank’s methodology (contemplating just the change in the central government’s net debt), the deficit stood at BRL 16.5 billion, while we expected -19.1 billion. Regional governments posted a surplus of BRL 2.7 billion (our call: 0.7 billion) and state-owned companies showed a surplus of BRL 0.4 billion (our call: 0.2 billion). The consolidated primary deficit over 12 months remained at 1.4% of GDP. 

  The general government’s gross debt climbed to 79.8% of GDP in August from 79.0% in July, while net debt narrowed to 54.8% of GDP from 55.8%, reflecting FX depreciation in the period. Over 12 months, the nominal deficit excluding FX swap transactions receded to 6.4% of GDP from 6.6%. A favorable fiscal scenario depends strictly on the approval of reforms, such as the pension reform, that signal a gradual return to primary surpluses that are compatible with structural stabilization in public debt.


Pedro Schneider

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