Brazil: Current account deficit widens in October
November 25, 2021
Brazil’s current account recorded a deficit of USD 4.5 billion in October, deteriorating from the USD 1.2 billion shortfall recorded in October 2020 and the USD 1.7 billion deficit clocked in September of this year.
October’s result largely reflected a smaller goods surplus and a reduction in the services account deficit. Contrastingly, the primary income account deficit increased compared to a year ago. Meanwhile, net foreign investment moderated in the month, totaling USD 2.5 billion (October 2020: USD 3.1 billion).
Accordingly, the 12-month sum of the current balance widened slightly to a USD 26.5 billion deficit from the USD 23.2 billion shortfall recorded in September, which was equivalent to approximately 1.7% of GDP (September: Approximately 1.5% of GDP).
Commenting on the outlook for Brazil’s current account, Alberto Ramos, economist at Goldman Sachs, noted:
“Overall, the short-term current account dynamics remain benign given still solid export demand and terms of trade compounded by a weak/competitive real effective exchange rate. However, beyond favorable cyclical dynamics, a deep fiscal adjustment to reduce the highly negative public sector savings remains key to enable a permanent structural current account adjustment (rather than just a cyclical adjustment driven by the weak below-potential domestic demand).”
Author: Stephen Vogado, Economist