UPDATE 2-Brazil budget gap widens, primary target within reach

Fri Sep 30, 2011 3:05pm EDT

Related Topics

  
 * Primary budget surplus totals 4.561 bln reais in August
 * Brazil's debt-to-GDP ratio 39.2 percent last month
 * Brazil expected to meet 2011 primary surplus target
 * Cbank lowers 2011 nominal deficit view to 2.4 pct of GDP
 (Adds budget deficit details, debt issuance plans)
 By Tiago Pariz and Isabel Versiani
 BRASILIA, Sept 30 (Reuters) - Brazil's budget deficit
widened in August from the year-ago period as its primary
surplus shrank, underscoring the fiscal pressures facing Latin
America's top economy, central bank data showed on Friday.
 Brazil posted a consolidated primary budget surplus
BRPSPS=ECI of 4.561 billion reais ($2.5 billion) in August,
down from 5.2 billion reais in the same month last year.
 Analysts in a Reuters poll had expected a primary surplus
of 5.35 billion reais.
 Despite the lower monthly surplus, Brazil is seen easily
delivering on its 2011 primary budget surplus target of 128
billion reais ($69 billion) as higher tax revenues and slower
spending help public coffers this year.
 A surge in prices has increased pressure on President Dilma
Rousseff to keep a lid on government spending despite growing
demands for more funds from allies in Congress.
 "Federal spending continues to rise modestly, helping the
government meet its 2011 fiscal target," Itau Unibanco said in
a research note to clients.
  An increase in the minimum wage next year and more
investment ahead of the 2014 World Cup will likely continue to
put pressure on Rousseff to relax fiscal discipline, analysts
say.
 The primary budget surplus represents the excess of
government revenue over all expenditure except for interest
payments. As such, it is a gauge of a country's capacity to
service its debt.
 The primary budget surplus was equal to 3.78 percent of
gross domestic product in the 12 months to August, the bank
said.
 Brazil plans to issue international debt before year-end, a
senior government official told Reuters on Friday, a key test
of the country's financial strength at a time when developed
economies struggle with mounting debt and widening deficits.
For details, see [ID:nS1E78T0XB]
 OVERALL BUDGET DEFICIT WIDENS
 The central bank said Brazil posted an overall budget
deficit of 17.101 billion reais in August, more than triple the
July deficit of 5 billion reais and more than the 10.7 billion
in August 2010.
 Still, the bank on Friday lowered its 2011 budget deficit
estimate to 2.4 percent of GDP from 2.5 percent previously.
 The overall budget balance, known locally as the nominal
budget balance, factors in all expenditures, including interest
payments.
 Brazil's public sector debt was equal to 39.2 percent of
GDP in August, the bank said. The bank reduced its 2011
estimate for public debt to 38.5 percent of GDP from 39 percent
previously.
 Investors are keeping a close eye on the Brazilian
government's fiscal discipline as 12-month inflation runs above
the central bank's 6.5 percent ceiling without showing clear
signs of slowing.
 In late August, Rousseff raised this year's primary budget
surplus target by 10 billion reais, or 0.25 to 0.30 percent of
gross domestic product, in a nod to the markets' concerns over
her commitment to control inflation.
 However, a surprise 50-basis-point central bank interest
rate cut on Aug. 31 dented authorities' inflation-fighting
credentials and fueled speculation the bank was more concerned
with fueling growth as the global economy weakens.
 The central bank on Thursday increased its 2011 inflation
forecast to 6.4 percent and acknowledged that prices may even
pierce its target ceiling of 6.5 percent.
 A rash of labor strikes to demand higher wages highlights
the growing demands faced by Rousseff and private companies to
hike spending even when the economy starts to slow.
 ($1=1.8577 Brazilian reais)
 (Reporting by Isabel Versiani, Alonso Soto and Tiago Pariz;
Writing by Luciana Lopez; Editing by Dan Grebler)


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