Brazil Central Bank Sees Narrower Current Account Gap in 2016

  • Weaker real in 12 months and economic slowdown reducing gap
  • Strong foreign direct investment boosted central bank forecast

Brazil’s central bank forecasts a narrower current account deficit in 2016, as a deep recession curbs imports and a relatively weaker currency supports exporters.

Latin America’s largest economy will this year post a current account gap of $15 billion, compared with a $25 billion deficit forecast in March, the central bank said on Friday. Foreign direct investment in Brazil is expected to reach $70 billion this year. Three months ago, that forecast was for $60 billion.

Brazil, which in April recorded its first monthly current account surplus since 2009, has seen imports slump and Brazilians spend less abroad due to the worst recession in decades and to an 8 percent currency depreciation over the past 12 months.

In May, the surplus in the current account, the broadest measure of trade in goods and services, reached $1.2 billion, compared with $412 million in the previous month and an estimate of $1.7 billion, the central bank said.

Foreign investment in Brazil dropped to $6.1 billion in May, compared with $6.82 billion in April. The estimate was for $5.87 billion.

Brazil’s external accounts have so far been a silver lining for the economy, which is expected to contract for a second consecutive year, marking the deepest recession in over a century.

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