Brazil: Current account deficit widens in November
Brazil’s current account recorded a deficit of USD 6.5 billion in November, deteriorating from the USD 2.5 billion shortfall recorded in November 2020 and the USD 4.4 billion deficit clocked in October of this year.
November’s result largely reflected the balance of trade in goods flipping into deficit and a wider primary income account deficit. Contrastingly, the services account deficit decreased compared to a year ago. Meanwhile, net foreign investment increased in the month, totaling USD 4.6 billion (November 2020: USD 2.3 billion).
Accordingly, the 12-month sum of the current balance widened slightly to a USD 30.8 billion deficit from the USD 26.8 billion shortfall recorded in October, which was equivalent to approximately 1.9% of GDP (October: Approximately 1.7% 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).”