• Primary budget deficit over 12 months was 0.76% of GDP
  • Government has revised down fiscal targets for 2015 and 2016

Brazil’s budget deficit before interest payments last month was narrower than economists forecast, as President Dilma Rousseff’s government struggles to fortify fiscal accounts to avoid another sovereign downgrade to junk.

The so-called primary deficit was 7.3 billion reais ($1.8 billion) in August, the central bank said Wednesday. The median estimate of 21 economists surveyed by Bloomberg was for a gap of 11 billion reais following a deficit of 10 billion reais the prior month. The nominal deficit reached 57 billion reais.

The government this year has revised down fiscal targets for 2015 and 2016 as recession undercuts tax collection and Congress fights the administration over spending cuts. Standard & Poor’s cut Brazil’s credit rating to junk nine days after Rousseff’s economic team issued revised budget forecasts that project a primary deficit for next year, down from the 2 percent surplus targeted at the beginning of the year.

Swap rates on the contract maturing in January 2017 fell 26 basis points, or 0.26 percentage point, at 10:40 a.m. local time. The real strengthened 1.8 percent to 3.9906 per U.S. dollar.

Over the past 12 months, Brazil accumulated a primary deficit of 0.76 percent of gross domestic product. The government this year targets a primary surplus of 0.15 percent of GDP.

The central bank this month cut its 2015 GDP estimate to negative 2.7 percent from a June forecast for a 1.1 percent decline. Analysts surveyed weekly by the bank forecast declines of 2.8 percent this year and 1 percent in 2016, which would represent the economy’s first two-year contraction since 1931.

In a bid to slow the fastest inflation in over a decade, policy makers have pushed Brazil’s benchmark interest rate to a nine-year high of 14.25 percent, seeking to slow annual price increases to 4.5 percent by year-end 2016.

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