Brazil widens 2020 govt primary deficit forecast to 12.1pc of GDP from 11pc

BRASILIA: Brazil's economy ministry on Friday revised its 2020 fiscal forecasts to account for the extension of emergency payments to the poor through the end of the year, which will push government and public sector deficits out to new records.

The ministry now expects the central government primary deficit excluding interest payments to reach 866.4 billion reais ($167 bln) or 12.1% of gross domestic product this year, up from 787.4 billion reais or 11% of GDP as forecast in July.

The wider public sector deficit was also revised wider to 891.1 billion reais or 12.4% of GDP, from 812.2 billion reais or 11.3% of GDP.

Speaking to reporters last week after data showed a narrower-than-expected government shortfall in July, Waldery Rodrigues, special secretary to the ministry, said the projected public sector deficit of 11.3% of GDP could be lowered.

The deficit forecasts, however, were raised, as the economy ministry said the cost of an extra four months of fiscal transfers to the poor and low-income workers would rise by 67.6 billion reais to 321.8 billion reais form 254.2 billion reais.

The new projections were based on its unchanged forecast that the economy shrinks by 4.7% this year, which is slightly more optimistic than the market consensus of a 5.3% decline, according to a central bank survey of economists.

The government's fiscal efforts to combat the COVID-19 crisis on the primary budget balance amount to 8.4% of GDP, the ministry said in a presentation, higher than most emerging economies.

The nominal public sector deficit this year, including interest payments, is now expected to widen to 17% of GDP, the ministry said.