President Dilma Rousseff vowed on Wednesday to take new measures to reduce the deficit her administration is projecting for 2016, without ruling out more spending cuts and additional taxes in Brazil. The 2016 budget unveiled on Monday projected Brazil’s first-ever primary fiscal deficit, before payment of interest on the national debt, sparking controversy.
The administration presented a budget with a deficit with the idea of being “transparent” and showing that the economy “clearly has problems,” Rousseff told reporters at a ceremony welcoming participants in the WorldSkills professional training competition.
Rousseff denied rumors that Finance Minister Joaquim Levy was leaving the Cabinet and said he was not unhappy with the government despite differences over the budget.
The administration estimates that Brazil will post a budget deficit of 30.5 billion Reais (about $8.4bn), the equivalent of 0.50% of GDP in 2016.
Some opposition members have called on Congress to reject the budget and economists warned that credit rating agencies could downgrade Brazil’s debt because of the budget shortfall.
Rousseff refused to rule out any measures to balance the budget, which posted a deficit in 2014 and is running below the administration’s projections this year.
“No source of revenues” has been ruled out, the president said. The budget adjustment measures already taken by the government “already had an effect” on the economy, which is in recession, Rousseff said.
The government released a report last Friday showing that the GDP contracted 1.9% in the second quarter on top of a decline of 0.70% in the first quarter, meeting the technical definition of a recession. Economists define a recession as six consecutive months of negative GDP.