UPDATE 1-Brazil current account deficit swells in July; FDI falls

Fri Aug 23, 2013 10:14am EDT

Related Topics

* Brazil posts current account gap of $9.018 billion in July

* Foreign direct investment falls to $5.212 billion

* FDI unlikely to cover large current account gap this year

BRASILIA, Aug 23 (Reuters) - Brazil's current account deficit more than doubled in July from a year ago, central bank data showed on Friday, with the country increasingly unlikely to cover that gap this year with slackening direct investment from abroad.

Brazil posted a current account gap of $9.018 billion in July, above an expected deficit of $8.4 billion, according to the median forecast of 17 analysts in a Reuters survey. The forecasts for the projected deficit ranged from $7.4 billion to $9.4 billion.

In July 2012 Brazil had a deficit of $3.746 billion. The current account is a country's broadest measure of foreign transactions encompassing trade, profit remittances, interest payments and other items.

In the first seven months of this year, the country has accumulated a current account gap of $52.472 billion, nearly double the $28.99 billion posted in the same period a year ago.

Even so, foreign direct investment during the same period this year totaled $35.239 billion, lagging the $38.169 billion of FDI in same period last year.

Unless there is a surge of FDI, it seems increasingly improbable that direct investment from abroad will cover the current account gap. FDI falls into the capital account of the balance of payments and has in past years offset current account deficits.

The widening current account helps explain the Brazilian currency's sharp depreciation over the last few months, which has been exacerbated by expectations of a scale back in U.S. monetary stimulus that triggered an exodus of capital from emerging-market nations.

For July, FDI in the country fell to $5.212 billion in July from $7.17 billion in June.

In the 12 months through July, the current account deficit was equivalent to 3.39 percent of gross domestic product, up from 3.17 percent in May.

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