Brazil Central Government Posts Widest Deficit Ever for June

Brazil’s central government in June posted the widest ever primary budget deficit for the month, as growth slows in the world’s second-largest emerging market.

The budget, which excludes interest payments as well as states, municipalities and government-run companies, reached a deficit of 1.9 billion reais ($844 million), compared with a 10.5 billion-real deficit a month earlier, the Treasury said in a report distributed in Brasilia today. That was the biggest gap since the government started publishing the statistic in 1997. The median estimate of 16 economists surveyed by Bloomberg was for a deficit of 1 billion reais.

President Dilma Rousseff’s administration is struggling to meet fiscal targets and contain inflation without cutting welfare and economic stimulus programs nearly two months before elections. Today’s data take the government further from meeting its surplus goal for 2014.

Swap rates on the contract due in January 2017, the most traded in Sao Paulo today, rose six basis points, or 0.06 percentage point, to 11.49 percent at 3:26 p.m. local time. The real weakened by 0.8 percent to 2.2481 per U.S. dollar.

The central government primary surplus so far this year is 17.2 billion reais, according to today’s report. That compares with the its target of 80.8 billion reais for 2014, or roughly 1.55 percent of gross domestic product, according to government estimates.

June’s budget result was affected by a 4.5 billion reais social security deficit.

Standard & Poor’s in March downgraded Brazil’s sovereign credit rating one level to BBB-, a step above junk on slower economic growth and what it said was deteriorating fiscal accounts. The move ended a decade-long stretch of upgrades for the world’s second-largest emerging market.

Analysts in a weekly central bank survey forecast Brazil’s economy will expand 0.9 percent this year, which would be the worst performance since the 2009 crisis. GDP grew 0.2 percent during the first quarter, half of the pace of the prior three months.

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