Brazil: Current account swings into surplus in August
September 24, 2021
Brazil’s current account recorded a surplus of USD 1.7 billion in August, improving from the USD 1.0 billion surplus recorded in August 2020 and contrasting the USD 1.5 billion surplus clocked in July of this year.
August’s result largely reflected a greater goods surplus and a reduction in the primary income account deficit compared to a year ago, while the services accounts moved further into deficit. Meanwhile, net foreign investment strengthened in the month, totaling USD 4.5 billion (August 2020: USD 2.6 billion).
Accordingly, the 12-month sum of the current balance narrowed slightly to a USD 19.5 billion deficit from the USD 20.2 billion shortfall recorded in July, which was equivalent to approximately 1.2% of GDP (July: Approximately 1.3% 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 favorable given still expanding export demand and solid terms of trade compounded by a weak/competitive real effective exchange rate, but a deep fiscal adjustment that would elevate public sector savings remains critical to enable a permanent structural current account adjustment (rather than just a cyclical adjustment driven by the weak below-potential domestic demand).”
Author: Stephen Vogado, Economist