June 29, 2020 / 4:03 PM / 5 days ago

Brazil posts record budget deficit in May, will revise 2020 forecasts

BRASILIA (Reuters) - Brazil’s government reported a record budget deficit in May, the Treasury said on Monday, adding that official debt and deficit forecasts for this year will be revised to reflect the heavy toll on public finances from the COVID-19 crisis.

With emergency spending to combat the economic and social effects of the pandemic soaring, and tax revenues plunging, the Treasury said net public debt this year is set to rise above 65% of gross domestic product and gross debt above 95% of GDP.

Speaking in a virtual press conference after May’s data were released, Treasury Secretary Mansueto Almeida said the primary budget deficit will almost certainly exceed 11% of GDP.

Brazil’s central government posted a primary budget deficit excluding interest payments of 126.6 billion reais ($23.3 billion) in May, a monthly record and slightly more than the 125.9 billion reais forecast in a Reuters poll of economists.

The accumulated budget deficit in the first five months of the year totaled 222.5 billion reais, Treasury said, compared with a 17.5 billion reais deficit a year ago.

Treasury said emergency measures are temporary and mostly concentrated in the April-June period, repeating its view that Brazil does not have the capacity to keep on providing fiscal support to the economy without risking a rise in taxes.

“The return to fiscal balance in the medium term is fundamental for getting public debt on a downward trajectory,” Treasury said. This will create the “fiscal freedom” needed to boost government investment and provide public services on a sustainable basis, it said.

Almeida said official forecasts will be revised on Tuesday. They currently put gross debt rising to 93.5% this year from 75.8% last year, and the public sector primary deficit reaching just over 700 billion reais, or almost 10% of GDP.

Reporting by Jamie McGeever, Editing by Franklin Paul and Andrea Ricci

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