MercoPress. South Atlantic News Agency

Brazil's nominal budget deficit far worse than expected, 6.7% of GDP

President Rousseff projected a primary surplus of 3.88bn in 2014, but was forced to amend the budget law late last year

Brazil's federal, state and local governments ended 2014 with a cumulative primary budget deficit equivalent to 12.51 billion dollars putting public finances in the red for the first time since the current reporting methodology was adopted in 2001, the Central Bank announced.

 Latin America's largest economy had posted a primary budget surplus - excluding debt service payments - of 35.12 billion in 2013.

Last year's deficit is equal to 0.63% of Brazil's GDP. The primary budget deficit or surplus is the reference employed in Brazil to gauge the health of public finances.

Brazil paid 119.77bn in debt service last year, which brings the nominal 2014 deficit to a record 132.27 bn.

The nominal deficit is equivalent to 6.7% of GDP, one of the worst ratios among major economies.

The government of President Dilma Rousseff, which projected a primary surplus of 3.88bn in 2014, was forced to amend the budget law late last year when it became obvious that the target would not be reached.

Meanwhile, inflation in 2014 reached 6.41%, just below the government's maximum target of 6.5%.

However the results which are even much worse than the already grim estimates of investors and ratings agencies, mean that newly appointed Finance Minister Joaquim Levy will have to slash spending or continue jacking up taxes to meet the government's goal of saving 1.2% of GDP in 2015.

The December results are the last under former Finance Minister Guido Mantega and Treasury Secretary Arno Augustin. Both left office at the end of the year after investors accused them of using “creative accounting” to bolster budget results.