Itaú BBA - Primary deficit of R$ 18.6 billion in March

Macro Brazil

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Primary deficit of R$ 18.6 billion in March

abril 30, 2019

Fiscal challenges remain significant

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

 The consolidated public sector posted a primary deficit of R$ 18.6 billion in March, better than our forecast (R$ 29.0 billion) and the market consensus (R$ 21.7 billion). The main deviation in our forecast was in the central government, which posted a deficit of R$ 21.1 billion, compared to our expectation of R$ 28.4 billion, due to expenses with court-ordered debt payments (“precatórios”) and judicial deposits that will only affect next month’s result. Regional and state governments posted surpluses of R$ 1.5 billion and R$ 0.2 billion, also better than expected. Over 12 months, the consolidated primary deficit fell from 1.5% to 1.4% of GDP between February and March. In our view, meeting the public sector’s annual primary deficit target of R$ 132 billion requires discipline, but shouldn’t be a major challenge.

 The general government’s gross debt rose from 77.4% to 78.4% of GDP between February and March, while the public sector’s net debt fell at the margin from 54.4% to 54.2% of GDP in the same period. Over 12 months, the nominal deficit excluding FX swap transactions fell from 6.9% to 6.8% of GDP. A favorable fiscal scenario is strictly dependent on the approval of reforms, such as the pension reform, that signal a gradual return to primary surpluses that are compatible with the structural stabilization of public debt.


Pedro Schneider
 

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



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