BRASILIA (Reuters) - The Brazilian government on Thursday loosened its 2020 fiscal target after failing to pass a plan to cut social security spending and predicted gross domestic product growth will slow after hitting a 2019 peak.
Brazil set targets of a primary deficit of 139 billion reais ($41 billion) for the central government in 2019, 110 billion reais in 2020 and 70 billion reais in 2021, confirming an earlier report by Reuters.
It previously aimed at deficits of 139 billion reais in 2019, 65 billion reais in 2020 and held no goal for 2021.
In a news conference, Finance Minister Eduardo Guardia said the government took a conservative approach in setting targets for 2019, when a new administration will take over following this year’s presidential elections in October.
“We have to be very careful in defining goals for the next government,” he said.
The looser 2020 target highlights the challenges facing President Michel Temer’s administration, whose approval rates have held at single digits, in implementing unpopular belt-tightening measures and curb mounting government debt.
After facing strong lawmaker opposition, the government gave up on its plan to revamp the pension system after a federal intervention in the state of Rio de Janeiro legally barred Congress from voting on constitutional amendments.
While planned privatizations and asset sales may help cover that gap, it is far from certain that the winner of this year’s presidential elections, the most wide-open and hard-to-predict in decades, will maintain commitments to such efforts.
The government forecast gross domestic product growth of 3.0 percent in 2019, 2.4 percent in 2020 and 2.3 percent in 2021. That suggest fading momentum for Latin America’s largest economy after it emerged from its deepest recession in decades.
Still, that could be revised up if policymakers revive the pension reform plans, Guardia said.
“Potential GDP may be higher from 2020 on if the country sticks to a process of structural reforms,” he said.
Writing by Bruno Federowski; Editing by Bernadette Baum