Brazil's current account deficit narrows in February

BRASILIA: Brazil's current account deficit narrowed in February, on track for a March surplus, the central bank said on Monday, as a weak currency and sluggish economic recovery slow demand for imports.

Brazil posted a current account deficit of $1.134 billion in February, narrowing from a deficit of $2.043 billion a year earlier, according to central bank data.

The central bank expects a current account surplus of about $2 billion in March, Fernando Rocha, head of the bank's statistics department, said at a press conference.

Recent data showed growth in Brazil's economy nearly halted at the end of 2018, and the weak recovery likely carried over into the beginning of this year.

"We've seen a continuing trend over the last eight months of the current account deficit narrowing and solid inflows on the financial side," Rocha said. "What we have is a small deficit, amply financed."

Foreign direct investment (FDI) in Brazil totaled $8.400 billion in the month, up from $4.712 billion a year earlier due largely to $4.1 billion of "intercompany" operations. The central bank forecasts $7.7 billion of FDI in March.

Portfolio investments, measuring faster-moving flows into financial assets, represented a net inflow of $4 billion in February, up from $516 million a year earlier, but slowing from inflows of nearly $7 billion in January.

There was a net $2 billion outflow from the Brazilian stock market in February and a net inflow of about $6 billion into Brazilian debt markets.

The central bank registered net portfolio outflows of around $2 billion in the first three weeks of March, Rocha said.

Alberto Ramos at Goldman Sachs said the current account data pointed to a cyclical swing rather than a lasting realignment.

"A deep fiscal adjustment that would elevate public sector savings is needed to facilitate a permanent structural current account adjustment, rather than just a cyclical adjustment driven by the weak below-potential domestic demand," he told clients in a note.

Brazil's current account deficit in the 12 months through February was equal to 0.74 percent of gross domestic product, down from 0.78 percent in January.