Brazil: Current account deficit moderates in September

Brazil’s current account balance improved in September, continuing to build on the considerable gains made over the past year. The current account registered a shortfall of USD 465 million, which was smaller than August’s USD 649 million deficit and a significant improvement on September 2015’s USD 3.1 billion deficit. Market analysts had expected a much wider USD 1.9 billion deficit.

September’s result was largely due to an improvement in the financial account. Meanwhile, the trade surplus moderated from August’s USD 4.1 billion to USD 3.8 billion in September. Exports swung to a 2.1% annual contraction after growing nearly 10% in August, in part due to a strong real. Foreign direct investment came in at USD 5.2 billion, down from August’s USD 7.2 billion.

The moving 12-month current account deficit continued to narrow and was USD 23.3 billion in September, which was a smaller shortfall than August’s USD 25.8 billion deficit. The improving current account balance has been a bright spot in Brazil’s economic data and it now rests at the lowest level seen since November 2009. September’s result is equivalent to approximately 1.3% of GDP.

Analysts who participated in this month’s LatinFocus Consensus Forecast panel expect a current account deficit of 1.1% of GDP in 2016. For 2017, panelists expect the current account deficit to be broadly stable at 1.3% of GDP.