Brazil: Current account logs fifth month of surplus in August
Brazil’s current account balance logged a surplus for the fifth consecutive month in August, registering a USD 3.7 billion surplus. August’s result contrasted the USD 3.0 billion deficit recorded in the same month a year earlier, although it was up from July’s surplus of USD 1.4 billion.
August’s reading largely reflected a narrower shortfall in the services account and a lower primary income deficit. Furthermore, the trade surplus increased in the month. The merchandise trade surplus rose to USD 6.0 billion from USD 3.6 billion in August 2019 on a sharper decline in imports than of exports. Meanwhile, net foreign direct investment weakened notably in August, totaling USD 1.4 billion (August 2019: USD 9.5 billion).
Accordingly, the 12-month sum of the current account balance narrowed to a USD 25.4 billion deficit, which equates to approximately 1.6% of GDP, down from the USD 32.2 billion shortfall logged in the 12 months ending in July (2.0% of GDP).
Commenting on the result, Alberto Ramos, economist at Goldman Sachs, reflected:
“Overall, the short-term current account dynamics are favorable but a deep fiscal adjustment that would elevate public sector savings is critical to facilitate a permanent structural current account adjustment (rather than just a cyclical adjustment driven by the weak below-potential domestic demand).”