Itaú BBA - Primary deficit of 13 billion reais in May

Macro Brazil

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Primary deficit of 13 billion reais in May

junio 28, 2019

The public sector’s net debt widened to 54.7% of GDP.


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 The consolidated public sector posted a primary deficit of 13 billion reais in May, somewhat better than our forecast and market consensus (both at -14.4 billion). The central government experienced a deficit of 14.7 billion reais (close to our -15 billion estimate). Regional governments posted a surplus of 1.2 billion reais and state-owned companies showed a deficit of 1.1 billion reais, while we anticipated a surplus of 0.5 billion for both. The consolidated primary deficit over 12 months remained at 1.4% of GDP, matching the April print. In our view, meeting the public sector’s annual primary deficit target of 132 billion reais requires discipline, but shouldn’t be so challenging, especially in case of a successful oil auction from the transfer-of-rights area (‘cessão onerosa’), expected in October, which could improve this year’s primary result by about 52 billion reais (0.7% of GDP).

 The public sector’s net debt widened to 54.7% of GDP in May from 54.4% in April. The general government’s gross debt declined at the margin to 78.7% of GDP from 79.0%, thanks to reimbursements by development bank BNDES to the National Treasury. Over 12 months, the nominal deficit excluding FX swap transactions remained at 6.8% of GDP. 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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