Brazil: Current account records another surplus in September
Brazil’s current account balance recorded a surplus for the sixth straight month in September, clocking in at USD 2.3 billion. The surplus contrasted the USD 2.7 billion deficit recorded in September 2019, but was it was down from August 2020’s surplus of USD 3.5 billion.
September’s result largely reflected a lower primary income deficit as well as a narrower shortfall in the services account. Furthermore, the trade surplus increased in the month. The merchandise trade surplus increased to USD 5.4 billion from USD 3.2 billion in September 2019 on a sharper decrease in imports than of exports. Meanwhile, net foreign direct investment weakened markedly in September, totaling USD 1.6 billion (September 2019: USD 6.0 billion).
Accordingly, the 12-month sum of the current account balance narrowed to a USD 20.7 billion shortfall, which equates to approximately 1.4% of GDP, down from the USD 25.7 billion deficit logged in the 12 months ending in August (1.7% of GDP).
Commenting on the result, Alberto Ramos, economist at Goldman Sachs, reflected:
“Overall, the short-term current account dynamics are quite favorable given solid export demand and improving terms of trade compounded by the significant contraction of domestic demand and real effective currency depreciation, 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).”