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By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The government of Brazil announced on Thursday (July 7th) the forecast for the 2017 primary deficit for the federal, state and city governments at R$143.1 billion. According to the forecast, next year will see a reduction of the primary deficit by almost R$27 billion from this year’s expected results.

Brazil,Finance Minister Henrique Meirelles announces 2017 budget forecast
Finance Minister Henrique Meirelles announces 2017 budget forecast, photo by Valter Campanato/Agencia Brasil.

To reach the primary deficit forecast for next year, however, the government says it will need to cut expenses and obtain additional revenues through privatizations, sales of assets, oil field concessions, and even possibly increasing taxes. This year’s primary deficit is expected to reach R$170 billion.

“We do not discard the possibility of tax increases. We will be deciding this issue until the end of August, when the 2017 budget is complete. By then, we will have defined if there will be the need to raise taxes”, said Brazil’s Finance Minister, Henrique Meirelles during the press conference to announce the primary deficit.

According to Meirelles, the government has faced constant increases in federal expenditures for the past two decades and now it must find additional sources of revenues to counterbalance these expenditures. For the official, without additional revenues, next year the primary deficit would surge to an estimated R$194 billion.

“Is it high?” queried Meirelles during the press conference. “Certainly, but it is already a significant decline of what result would be if one followed the tendencies of the last few years for revenues and expenditures.” According to Meirelles, only in 2019, will it be possible for the public sector to register a primary surplus.

Government officials, however, increased the expected GDP growth for next year from one percent to 1.2 percent, and decreased its forecast for annual inflation, from six percent to 4.8 percent.

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