Brazil Primary Deficit Unexpectedly Shrinks After Downgrade

  • Gap was less than half the median estimate of analysts
  • Rousseff cutting spending to shore up fiscal accounts

Brazil’s central government primary budget deficit shrank last month, beating estimates made by analysts who expected fiscal accounts to deteriorate.

The gap, which excludes interest payments as well as municipalities and government-run companies, was 5.1 billion reais ($1.3 billion) in August, Brazil’s Treasury reported Tuesday. The median estimate of 22 economists surveyed by Bloomberg was for a deficit of 10.7 billion reais following a gap of 7.2 billion reais in July.

This is the first time in more than a year the primary budget result has positively surprised analysts.

President Dilma Rousseff’s economic team is struggling to shore up fiscal accounts and post a primary budget surplus this year and next as a shrinking economy crimps efforts to boost revenue. Rousseff’s administration this month proposed billions of reais in budget cuts, including moves to cap salaries of civil servants and trim social programs.

Brazil’s bond risk as measured by credit-default swaps fell 6.5 basis points to 527 basis points at 2:34 p.m. local time.

The government also is proposing tax increases after Standard & Poor’s this month cut Brazil’s credit rating to junk.

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