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Brazilian Central Bank lowers current account deficit forecast

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Staff writer ▼ | September 23, 2015
The Brazilian Central Bank has revised its current account deficit projection from $81 billion to $65 billion this year.
Brazil   From $81 billion to $65 billion
The deficit in international transactions involving the purchase and sale of goods and services with the rest of the world is expected to amount to 3.71% of Gross Domestic Product (GDP). The previous forecast was 4.17%. The numbers were released by the Brazilian Central Bank (BC).

From January to August, the deficit was $46.148 billion, against $65.248 billion a year ago. By the end of last year, the deficit had reached $103.597 billion, tantamount to 4.42% of GDP.

According to the head of the BC’s Economic Department, Tulio Maciel, recession and the high dollar drove the revision. “The exchange rate has an immediate impact, because it directly influences the cost of transactions,” said Maciel. “The exchange rate is a key component of the current account. It works to balance said accounts. As such, it is important for it to float,” he added.

The balance of trade should help ease the deficit, since the BC forecasts a $12 billion trade surplus this year. The previous trade surplus projection was $3 billion. At the end of August, exports were higher than imports by $6.333 billion, whereas a $889 million deficit was recorded in the comparable period last year.

The services account (international travel, transportation, equipment rental, insurance and others) is expected to run a $40.3 billion deficit this year. The BC’s prior projection had been $44.2 billion. There was a $26.417 billion deficit from January to August this year and a $30.735 billion deficit in the same period of last year.

The primary income account (profits and dividends, payment of interest and wages) should run a $39.7 billion as per the revised estimates; the BC’s previous forecast had been $41.6 billion. A $27.619 billion primary income deficit was recorded year-to-date through August of this year; a year ago, the deficit reached $35.187 billion.

The secondary income account (income generated in one economy and distributed to another, such as donations and remittances in US dollars, with no corresponding services or goods transfers) is expected to show a $2.9 billion surplus in the revised forecasts, whereas the previous number had been $1.8 billion.

Year-to-date through August, Brazil’s secondary income account reached $1.555 billion, as against $1.562 billion a year ago.