Brazil's finances continued to deteriorate in July as the COVID-19 crisis pushed the public sector debt and deficit as a share of the economy to new records, official figures showed on Monday, although not as bad as economists had feared.
The national debt rose to a record 86.5% of gross domestic product in July and the public sector primary deficit in the month, excluding interest payments, was 81.1 billion reais (US$ 15 billion), the central bank said on Monday.
The primary deficit in the 12 months to July rose to 537 billion reais from 459 billion reais in June, the central bank said. As a share of GDP, it widened to 7.5% from 6.4% in June, and just 0.8% pre-coronavirus in February.
In the first seven months of the year, the primary deficit ran at 11.9% of GDP, compared with just 0.2% of GDP in the same period last year.
The latest official government forecast is for a public sector primary deficit of 812 billion reais this year, or 11.3% of GDP. But that does not include the extension of emergency aid payments to the poor announced by President Jair Bolsonaro and expected to be confirmed this week.
Alberto Ramos, head of Latin American research at Goldman Sachs, expects the picture to deteriorate as the recession hammers tax revenues and prompts additional government spending.
”We now expect the consolidated public sector to record a primary fiscal deficit of around 13% of GDP (likely higher) ... and gross public debt to close over 95% of GDP,” he wrote on Monday.
In nominal terms, including interest payments, the public sector deficit was 86.9 billion reais in July, the central bank said, also less than the expected 109.9 billion reais.