Brazil posts a fiscal surplus in January, but public finances remain fragile

The Brazilian government posted a fiscal surplus of 46.9 billion reais (US$ 12.5 billion) in January, the central bank said, above forecasts but unchanged from a year earlier. In Brazil, January is traditionally marked by higher tax revenues and lighter spending, so these figures do not change the fragile outlook for public finances, analysts said.

The primary surplus, comprising the central government, regional governments and state-owned enterprises before interest payments, exceeded the 34.3 billion reais median forecast in a poll of economists.

For the 12 months to January, the primary deficit was equal to 1.57% of gross domestic product (GDP), the central bank said, a figure that analysts call worryingly high.

“Overall, the fiscal picture remains very weak, despite the effort over the last two years to contain discretionary spending and the significant retrenchment of public investment,” said Alberto Ramos, head of Latin America research at Goldman Sachs.

“A deep, permanent, large structural fiscal adjustment remains front-and-center on the policy agenda to restore both domestic and external balance,” he wrote in a note to clients.

Brazil’s gross public sector debt in January was 5.3 trillion reais, or 76.7% of GDP, unchanged from the month before, the central bank said.

Ramos warned that public debt is on track to hit a “disquieting” 80% of GDP before stabilizing, leaving the economy with little wiggle room to cope with adverse shocks. Earlier on Thursday, data showed that Brazil’s economy almost ground to a standstill at the end of last year, with economists warning that the weak momentum is likely to carry on into this year.

President Jair Bolsonaro’s cornerstone economic proposal is a pension reform bill he delivered to Congress this month, which would raise the minimum retirement age in an effort to save more than 1 trillion reais over the next decade.

The latest figures showed a surplus of 35.6 billion reais from the central government, 10.8 billion reais from regional governments and 507 million reais from state-run firms.


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