Brazil Posts Wider-Than-Expected Primary Budget Deficit in May

Brazil recorded in May a wider-than-expected fiscal deficit before interest payments as Finance Minister Henrique Meirelles anticipated 2017 will be another year of budget shortfalls for Latin America’s largest economy.

The so-called primary deficit that includes results of states, municipalities and state-owned companies was 18.1 billion reais ($5.6 billion), the central bank said Wednesday. That compares with a median forecast for a 15.8 billion-real deficit by analysts in a Bloomberg survey. The nominal gap reached 60.6 billion reais in the month, versus the 54 billion-real deficit projected by analysts.

“A (primary) surplus target in 2017 would be rather unrealistic,” Meirelles said in an event in Brasilia, adding that the government will announce its target for 2017 in the beginning of next week.

Brazil’s fiscal crisis has become a central concern of Acting President Michel Temer, who took over the top job in May pledging to revive confidence in an economy rattled by rising unemployment, shrinking industrial output and a barrage of sovereign-credit downgrades. Temer, 75, says he will draw on his majority in Congress to win approval of legislation designed to cap public expenditures and trim pension payouts.

Analysts surveyed by the central bank are skeptical he can succeed in shoring up fiscal accounts, as they don’t expect Brazil to post an annual primary surplus until after he leaves office. The government this year is targeting a deficit no wider than 170.5 billion reais.

Credit-rating companies and bond traders use the country’s primary result to gauge its fiscal health and ability to service debt. Brazil last year lost its hard-earned investment-grade status, while the real depreciated 33 percent amid investor concerns about its widening deficit and shrinking economy.

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