Brazil Federal Primary Budget Deficit Wider Than Forecast in May

Brazil’s central government primary deficit was wider than forecast last month as Finance Minister Joaquim Levy struggles to shore up fiscal accounts amid a shrinking economy.

The deficit, which excludes interest payments as well as municipalities and government-run companies, was 8.1 billion reais ($2.6 billion) in May, Brazil’s Treasury said in a report Thursday. The median estimate of eight economists surveyed by Bloomberg was for a gap of 7.8 billion reais following a surplus of 10.1 billion reais in April.

The budget results have been below analysts expectations since Levy took office in January. The economist and former banker is trying to convince lawmakers to implement fiscal-austerity measures that he says are key to shrinking the budget deficit to avert a credit downgrade.

The benchmark Ibovespa stock index fell 1.1 percent at 4:34 p.m. local time as investors express concern that a congressional vote Wednesday night could derail Levy’s efforts. Lawmakers went against the government and passed an amendment that raises spending on retirement benefits.

Investors on Thursday are watching how the lower house of Congress votes on amendments to a government bill that raises taxes on corporate sales. Levy says the legislation is a key part of his fiscal-austerity package and will boost government coffers by nearly 13 billion reais a year.

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