Brazil: Current account records largest deficit in six months in July
August 23, 2016
Brazil’s current account balance deteriorated in July, after making considerable gains in previous months. The current account registered a shortfall of USD 4.1 billion, which was notably worse than June’s USD 2.5 billion surplus yet an improvement on July 2015’s USD 5.7 billion deficit. The result marked the largest deficit recorded in six months. Market analysts had expected a milder USD 3.8 billion deficit.
Foreign direct investment came in at USD 78 million, the lowest result on record, which drove the worsening in the current account (June: USD 3.9 billion). Meanwhile, the trade surplus improved from June’s USD 4.0 billion to USD 4.6 billion in July (July 2015: USD 2.4 billion). Behind the improvement was a sharp 27.2% annual contraction in imports given the abysmal state of the economy (June: -15.4% year-on-year). The fall in exports moderated from June’s 14.7% decline to 11.9% in July, but the result remains poor as weak external demand along with a recent strengthening of the real hamper overseas sales.
The moving 12-month current account deficit came in at USD 27.9 billion in July, which was a smaller shortfall than June’s USD 29.5 billion deficit. The improving current account balance has been a bright spot in Brazil’s economic data amidst an onslaught of negative news concerning Latin America’s largest economy. July’s result is equivalent to approximately 1.6% of GDP and is the smallest deficit in over six years.