Brazil's primary deficit shrinks again, now smallest in over a year

[December 30, 2019]  By Jamie McGeever

BRASILIA (Reuters) - Brazil's public sector finances improved further in November, central bank figures showed on Monday, as the deficit as a share of the overall economy shrank to its smallest in over a year and the national debt fell for the third straight month.

The primary deficit for the consolidated public sector, before interest payments are factored in, fell to 1.24% of gross domestic product in the 12 months to November from 1.25% the month before, the smallest shortfall in 13 months.

In hard cash terms, that translated into a deficit of 89.49 billion reais in the 12 months to November, compared with 89.78 billion reais registered in the same period a year ago.

Brazil's right-wing government has made restoring public finances to health one of its top economic priorities, mostly via severe budget freezes and cuts, and pushing through landmark legislation to reform the social security system.

At the start of the year the government projected a primary deficit of more than 130 billion reais for 2019, but the latest Treasury forecasts were that it will be somewhere between 60 and 80 billion reais.

In nominal terms, after interest payments are accounted for, Brazil's nominal deficit last month was 53.2 billion reais, the central bank said, bringing the accumulated deficit over the past 12 months to 458.8 billion reais, or 6.36% of GDP.

The central bank's aggressive interest rate cuts this year have helped reduce interest payments on government debt. In the 12 months to November, interest payments totaled 369.3 billion reais or 5.12% of GDP, compared with 385.6 billion reais or 5.61% of GDP in the same period a year ago.

Brazil's national debt as a share of GDP shrank to 77.7% from 78.3% in October, according to the central bank. That is the lowest since February and marks the third month in a row of decline, a trend not seen since 2011.

These figures suggest Brazil's debt is no longer on track to exceed the 80% of GDP threshold that many analysts said had looked inevitable when it touched a record 79.7% of GDP in August this year.

Earlier this month, S&P Global Ratings revised the outlook on Brazil to positive from stable, citing the government's continued implementation of measures to reduce its deficit.

(Reporting by Jamie McGeever; Editing by Mark Heinrich)

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