Brazil’s current account deficit shrinks to smallest in over 13 years

RIO DE JANEIRO, BRAZIL – Brazil’s balance of payments position with the world improved again in May, Central Bank figures showed on Friday, June 25, as the second consecutive monthly current account surplus shrank the rolling 12-month deficit to its smallest in more than 13 years.

Latin America’s largest economy also attracted a combined US$7.2 billion of foreign direct investment and portfolio inflows into its domestic stock and bond markets in the month, the figures showed.

The narrowing current account deficit and consistent capital inflows recently have helped propel a rapid rise in the exchange rate, with the dollar now trading below R$5.00 for the first time in a year.

Central Bank figures show that Brazil posted a US$3.8 billion current account surplus in May, slightly less than the US$4 billion median forecast in a Reuters poll of economists.

That was largely thanks to a goods trade surplus of US$8.1 billion in the month. Exports jumped 54.4% from the same month last year to a record US$27.2 billion, outstripping a 31.9% increase in imports.

In the 12 months through May, the current account deficit totaled US$8.4 billion, or 0.55% of gross domestic product (GDP), which was the smallest since February 2008. The deficit a year earlier stood at almost 4% of GDP.

On Thursday, the Central Bank raised its 2021 current account surplus forecast to US$3 billion from US$2 billion. If achieved, it would be the country’s first annual surplus since 2007.

On the capital flow side, net foreign direct investment in May totaled US$1.2 billion, the bank said. That was less than the US$2.5 billion forecast in the Reuters poll.

Based on partial data already in for June, the Central Bank said it expects a current account surplus of US$6.5 billion and FDI inflows of US$2.5 billion in the month.

Investors plowed a net US$6 billion into Brazilian stocks and bonds in May. Stocks saw a US$2.9 billion inflow and debt securities attracted US$3.1 billion, the central bank said.

On Thursday, the bank more than doubled its 2021 portfolio inflows forecast to US$21 billion from US$10 billion. Net inflows in the 12 months through May totaled US$41.8 billion.