Brazil: Current account deficit narrows in January
Brazil’s current account recorded a deficit of USD 8.1 billion in January, improving slightly from the USD 8.3 billion shortfall recorded in January 2021 but worsening from the USD 5.8 billion deficit clocked in December 2021.
January’s result largely reflected the deficit of trade in goods reducing. Contrastingly, the primary income account deficit widened and the services account shortfall increased compared to a year ago. Meanwhile, net foreign investment was positive in the month, totaling USD 4.7 billion in inflows (January 2021: USD +3.5 billion).
Accordingly, the 12-month sum of the current balance tightened slightly to a USD 27.7 billion deficit from the USD 27.9 billion shortfall recorded in December, which was equivalent to approximately 1.7% of GDP (December: 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 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).”