Brasília – The Brazilian Central Bank has revised its current account deficit projection from US$ 81 billion to US$ 65 billion this year. The deficit in international transactions involving the purchase and sale of goods and services with the rest of the world is expected to amount to 3.71% of Gross Domestic Product (GDP). The previous forecast was 4.17%. The numbers were released this Tuesday (22nd) by the Brazilian Central Bank (BC).
From January to August, the deficit was US$ 46.148 billion, against US$ 65.248 billion a year ago. By the end of last year, the deficit had reached US$ 103.597 billion, tantamount to 4.42% of GDP.
According to the head of the BC’s Economic Department, Tulio Maciel, recession and the high dollar drove the revision. “The exchange rate has an immediate impact, because it directly influences the cost of transactions,” said Maciel. “The exchange rate is a key component of the current account. It works to balance said accounts. As such, it is important for it to float,” he added.
The balance of trade should help ease the deficit, since the BC forecasts a US$ 12 billion trade surplus this year. The previous trade surplus projection was US$ 3 billion. At the end of August, exports were higher than imports by US$ 6.333 billion, whereas a US$ 889 million deficit was recorded in the comparable period last year.
The services account (international travel, transportation, equipment rental, insurance and others) is expected to run a US$ 40.3 billion deficit this year. The BC’s prior projection had been US$ 44.2 billion. There was a US$ 26.417 billion deficit from January to August this year and a US$ 30.735 billion deficit in the same period of last year.
The primary income account (profits and dividends, payment of interest and wages) should run a US$ 39.7 billion deficit as per the revised estimates; the BC’s previous forecast had been US$ 41.6 billion. A US$ 27.619 billion primary income deficit was recorded year-to-date through August of this year; a year ago, the deficit reached US$ 35.187 billion.
The secondary income account (income generated in one economy and distributed to another, such as donations and remittances in US dollars, with no corresponding services or goods transfers) is expected to show a US$ 2.9 billion surplus in the revised forecasts, whereas the previous number had been US$ 1.8 billion. Year-to-date through August, Brazil’s secondary income account reached US$ 1.555 billion, as against US$ 1.562 billion a year ago.
Foreign Direct Investment
Regarding foreign direct investment (FDI), the BC forecasts a US$ 65 billion net inflow. From January to August, inflows reached just over US$ 42 billion. The previous projection for 2015 was US$ 80 billion, but despite the reduction, the total amount should suffice to offset the current account deficit, according to the BC. “The conditions for financing of current transactions remain adequate,” Maciel said.
Investments in shares traded in Brazil and abroad should reach US$ 11 billion this year; the last projection had been US$ 15 billion. From January to August, net inflows of these investments amounted to US$ 10.127 billion.
The revised surplus forecast for investments in bonds is US$ 20 billion. The prior forecast had been US$ 26.5 billion. From January through August, a US$ 18.719 billion surplus was recorded.
*Translated by Gabriel Pomerancblum
