Itaú BBA - Primary surplus of 6.6 billion reais in April

Macro Brazil

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Primary surplus of 6.6 billion reais in April

mayo 31, 2019

April’s result is a seasonally surplus

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

 The consolidated public sector posted a primary surplus of 6.6 billion reais in April, beating our call (2.8 billion) and in line with market consensus (6.6 billion). The central government had a surplus of 6.5 billion reais (vs. our 5.4 billion estimate), thanks to lower mandatory expenditures. Regional governments posted a surplus of 0.7 billion reais and state-owned companies showed a deficit of 0.2 billion reais, which were both better than anticipated. The consolidated primary deficit over 12 months remained at 1.4% of GDP, matching the March 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 auction of oil 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 general government’s gross debt increased to 78.8% of GDP in April from 78.5% in March, while the public sector’s net debt declined at the margin to 54.2% of GDP from 54.3%. 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
 

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



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