Brazil: Current accounts posts a deficit in the final month of 2020
After eight consecutive months of logging surpluses, Brazil’s current account balance posted a USD 5.4 billion deficit in December, widening from the USD 4.7 shortfall recorded in the same month of 2019 and contrasting the USD 0.1 billion surplus in November.
The result largely came on the back of a weaker trade balance, while both the services and primary income account posted narrower deficits. The goods trade balance recorded a USD 1.0 billion shortfall in December, contrasting last year’s USD 5.1 billion surplus, as imports jumped in the month while exports were virtually unchanged. Moreover, net foreign direct investment, weakened notably in the month, totaling USD 0.7 billion (December 2019: USD 2.8 billion).
Meanwhile, the full-year current account deficit narrowed to USD 12.5 billion in 2020 from the USD 50.7 billion shortfall recorded in 2019, which was equivalent to approximately 0.9% of GDP (2019: approximately 2.7% of GDP).
Commenting on the outlook, Alberto Ramos, economist at Goldman Sachs, reflected:
“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).”