Itaú BBA - Primary deficit of 13.5 billion reais in June

Macro Brazil

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Primary deficit of 13.5 billion reais in June

julio 30, 2018

Fiscal challenges remain

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

The consolidated public sector posted a primary deficit of 13.5 billion reais in June, which was better than our expectation (-17.2 billion) and market consensus (-15.0 billion). Regional governments posted a surplus of 0.4 billion reais (our call: 0.2 billion), while state-owned companies had a surplus of 1.1 billion reais (we estimated a deficit of 0.2 billion). In addition to a better reading for state-owned companies, the main surprise vs. our forecast was the bigger distortion between the central government’s result published by the National Treasury last week (deficit of 16.4 billion reais vs. our 15.5 billion estimate) and the Central Bank’s result for the same line (deficit of 15 billion reais vs. our 17.2 billion call). The consolidated primary deficit accumulated over 12 months receded to 1.3% of GDP from 1.4%.

The general government’s gross debt reached 77.2% of GDP in June, while the public sector’s net debt hit 51.4% of GDP. Notwithstanding still-negative annual primary results, the repayment by development bank BNDES of 130 billion reais to the National Treasury and historically-low 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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