Brazil’s June current account deficit was wider than economists forecast, as imports fall amid an economic slowdown.
The deficit in the current account, the broadest measure of trade in goods and services, narrowed in June to $2.5 billion from a revised $3.3 billion a month earlier, the central bank said in a report distributed today in Brasilia. Foreign investment in Brazil during the month fell to $5.4 billion from $6.6 billion. Economists surveyed by Bloomberg forecast a deficit of $2.1 billion and foreign investment of $4.5 billion for last month.
Brazil’s real has weakened as political turmoil, corruption scandals and a looming recession affect the economy. The currency devaluation boosts exports and slows imports, with an improving trade balance helping to cut the current account deficit. As the government labors to pass bills to mend the biggest budget gap on record, the central bank has signaled it will continue to raise rates to fight the highest inflation in more than a decade.
Swap rates on the contract due in January 2017, the most traded in Sao Paulo today, fell six basis points, or 0.06 percentage point, to 13.27 percent at 10:34 local time. The real weakened by 0.8 percent to 3.1978 per U.S. dollar and has dropped 16.9 percent this year, the most among major currencies tracked by Bloomberg.
Brazil’s current account gap this year through June was $38.3 billion, compared with $50 billion in the same period last year. Imports in June declined 16.5 percent from a year ago to $15.2 billion, while exports during the same period declined 3.9 percent to $19.6 billion. The trade surplus in June was $4.4 billion, up from $2.2 billion a year ago.
Annual inflation in the month through mid-July reached 9.25 percent, more than double the midpoint of the official target range. The central bank has boosted the benchmark rate at six straight meetings to 13.75 percent.
Analysts surveyed by the bank forecast Latin America’s largest economy will contract by 1.7 percent this year, the worst recession in 25 years.