Itaú BBA - Primary budget deficit of 8.2 billion reais in May

Macro Brazil

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Primary budget deficit of 8.2 billion reais in May

junio 29, 2018

Fiscal rebalancing remains challenging

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The consolidated public sector posted a primary budget deficit of 8.2 billion reais in May, better than our expectation (-10.0 billion) and market consensus (-12.2 billion). The consolidated primary deficit accumulated over 12 months improved to 1.4% of GDP from 1.8%. The central government’s result, as published by the National Treasury, was a deficit of 11.0 billion reais (our estimate: -9.1 billion), in a result supported by 3.5 billion reais in withdrawals from the sovereign wealth fund and 4.8 billion reais in dividends paid by state-owned enterprises that were higher than in recent years. Regional governments posted a surplus of 2.2 billion reais, while state-owned companies had a surplus of 0.7 billion reais (we estimated a surplus of 0.9 billion and zero, respectively).

The general government’s gross debt reached 77.0% of GDP in May, while the public sector’s net debt hit 51.3% of GDP. Notwithstanding still-negative annual primary results, the repayment by development bank BNDES of 130 billion reais to the National Treasury, better economic growth and lower real interest rates will moderate the advance in debt as a share of GDP in 2018. However, without reforms (such as the pension reform), fiscal readings will resume a worsening trend from 2019 onward.


Pedro Schneider


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



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