Brazil: Current account logs another deficit in January
Brazil’s current account deficit narrowed to USD 7.3 billion in January, from the USD 10.3 billion shortfall recorded in the same month of 2020; however, widening from the USD 5.4 billion deficit in December last year.
January’s result was largely driven by a narrower deficit in the trade balance, while both the services and primary income account logged smaller shortfalls. The goods trade balance recorded a USD 1.9 billion deficit in January, improving from last year’s USD 2.5 billion shortfall, as imports fell in the month while exports expanded. Meanwhile, net foreign direct investment, weakened notably in the month, totaling USD. 1.8 billion (January 2020: USD 2.7 billion).
Accordingly, the 12-month sum of the current account balance narrowed to a USD 9.4 billion deficit from the USD 12.5 billion shortfall recorded in December 2020, which was equivalent to approximately 2.9% of GDP (December 2020: approximately 0.9% of GDP).
Reflecting on the outlook for Brazil’s current account dynamics, Alberto Ramos, economist at Goldman Sachs, commented:
“Overall, the short-term current account dynamics remain favorable given solid export demand and improving terms of trade compounded by the soft domestic demand and a weak/competitive real effective exchange rate, but a deep fiscal adjustment that would elevate public sector savings remains critical to facilitate a permanent structural current account adjustment (rather than just a cyclical adjustment driven by the weak below-potential domestic demand).”