Itaú BBA - Primary deficit of BRL 2.8 billion in July

Macro Brazil

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Primary deficit of BRL 2.8 billion in July

agosto 30, 2019

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 BRL 2.8 billion in July, better than our forecast and market consensus (-7.0 billion and -4.0 billion, respectively). The central government experienced a deficit of BRL 6.0 billion under the National Treasury’s methodology (which considers the gap between revenues and expenses), better than our 6.8 billion estimate. Under the Central Bank’s methodology (contemplating just the change in the central government’s net debt), the deficit stood at BRL 1.4 billion, while we expected -3.8 billion. This distortion between the two metrics happens often in monthly figures but tends to vanish by year-end. Regional governments posted a deficit of BRL 1.9 billion (matching our call) and state-owned companies showed a surplus of BRL 0.6 billion (we anticipated a zero reading). The consolidated primary deficit over 12 months remained at 1.4% of GDP. 

• The public sector’s net debt widened to 55.8% of GDP in July from 55.2% in June, while the general government’s gross debt climbed to 79.0% of GDP from 78.7%. Over 12 months, the nominal deficit excluding FX swap transactions remained at 6.6% 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
 

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



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