Brazil Current Account Deficit Shrinks to Smallest Since February 2018

RIO DE JANEIRO, BRAZIL – Brazil’s balance of payments position with the rest of the world improved in October, figures showed on Wednesday, as a US$1.5 (R$7.9) billion current account surplus helped narrow the 12-month accumulated deficit to its smallest in two and a half years.

A widening surplus in goods trade, and shrinking deficits in services and primary income again delivered the overall current account surplus, the central bank said, adding that it forecasts a surplus of US$1 billion for November.

Revisions to previous months meant that Brazil posted a tiny current account deficit of US$10.8 million in June, breaking what would have been a run of seven consecutive surpluses, something not seen since 2006.

October’s surplus was more than the US$1.3 billion forecast in a Reuters poll of economists, and narrowed the overall deficit in the preceding 12 months to 1% of gross domestic product, the smallest since February 2018.

Goods exports fell 8.6% from the same month last year to US$18 billion, the central bank said, while imports fell 26.3% to US$13.1 billion, giving a trade surplus of US$4.9 billion. So far this year, exports have fallen 7.8% and imports have slumped 15.1%.

The services deficit shrank by 55.2% from a year earlier to US$1.6 billion and the primary income deficit shrank by 70.6% to US$1.9 billion, the central bank said.

The current account deficit in the first 10 months of the year stood at US$7.6 billion.

Foreign direct investment totaled US$1.8 billion in October, sharply down from US$8.2 billion a year ago, the central bank said, adding that it forecasts FDI of $1 billion in November.

On the portfolio side, Brazil posted an overall net inflow of US$5.5 billion into domestic stocks and bonds last month, comprised of US$2.8 billion into stocks and US$2.7 billion into bonds.

Inflows have returned in recent months, but so far this year a net US$21.6 billion has been pulled from domestic markets, the central bank said, and US$27.4 billion has been pulled in the last 12 months.

Source: Reuters