Brazil reported an important current account (CAD) deficit of BRL 6.6 billion in August 2024. This is a dramatic increase from BRL 1 million recorded during the same period last year.
This latest number has exceeded the market’s expectations. The forecast was for a BRL 5,1 billion deficit.
The current account deficit is the largest since December 20,23. This highlights the growing challenges facing the country as exports and imports both increase.
The Banco Central do Brasil reported that Brazil’s August trade balance was BRL 4,0 billion in deficit, which is a significant decline from a BRL 4,8 billion surplus the year before.
This shift in the economy is driven by a 6.5% decline in exports and a spike of 12% in imports.
These figures indicate a growing reliance on imported goods and a concern about Brazil’s ability to compete in international markets. This could put further pressure on the economy.
The largest CAD for 7 months
Brazil’s deficit on its current account has steadily increased. The deficit in July 2024 was $5.2 billion. This is up from $3.6 in the same period in 2023, and above the expected $4 billion shortfall.
The country is under increasing pressure, as reflected by the current account deficit.
Services played an important role in causing the deficit to balloon. Services deficit grew by $1.6billion to $4.75billion, primarily due to a 70 percent increase in transportation expenses.
The analysts warn that the upward trend of service costs will only exacerbate Brazil’s problems with its current account and make stabilizing the economy more difficult.
Tourism is also a weakness in Brazil’s recovery.
The sector is still struggling to recover fully from the COVID-19 outbreak, but it has also contributed to the growing services deficit as Brazilians continue spending on foreign services.
The experts say that the key to solving this problem is by boosting domestic tourism.
The primary income deficit has improved
Brazil has seen a decrease in its primary income deficit despite the current account deficit.
In August the deficit dropped to BRL 6,2 billion, which is a decrease of BRL 851, million from last year.
The improvement in the investment climate of Brazil can be attributed a decrease of 18.7% for net expenses on profits and dividends.
Brazil’s surplus of secondary income remained at BRL 259.9 million. This was supported by consistent inflows through remittances, and from foreign aid.
Experts warn that while the surplus is a financial cushion, the small size indicates a greater need for foreign capital to help Brazil’s economic recovery.
Alarming year-to-date deficit
Brazil’s current account deficit for the first eight month of 2024 has increased to BRL 30. 4 billion. This is more than twice the BRL 13. 5 billion deficit that was recorded in the same time period last year.
The rapid rise in the price of oil raises concerns over its long-term impact on Brazil’s creditworthiness and economic stability.
Brazil’s government is under increasing pressure to implement rapid economic reforms due to the growing deficit.
According to analysts, addressing Brazil’s trade imbalances as well as boosting its domestic manufacturing is crucial for stabilizing the economy.
Brazil’s future financial stability will depend on its ability to successfully implement reforms in the face of increasing deficits and challenges.
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