Under Bolsonaro, Brazil’s Deficit Falls 14% Compared to 2018

Controversial right-wing President Jair Bolsonaro has made deficit reduction a top priority in his administration.

Bolsonaro is seeking to reign in Brazil’s massive state spending (YouTube).

In the first half of 2019, Brazil’s deficit stood at 186 billion reais (about USD $49.5 billion dollars), value at 14.05% lower than the deficit for the same period in 2018, the Central Bank reported Monday.

The deficit is the difference between revenues and expenditures of the Brazilian public sector in the first six months of this year, and dropped by 22.71% in comparison with that of the same period in 2017, according to government data.

The sharp fall in the fiscal deficit reflects the success of the measures taken by the government of President Jair Bolsonaro to reduce public spending, one of his main objectives.

Since assuming office on January 1, Bolsonaro has promoted a liberal economic policy that seeks to reduce the size of the state, privatize non-strategic state companies, and cut costs to reduce deficits and Brazil’s crushing debt load.

The Ministry of Economy has already announced two cuts amounting to 31.2 billion reais (about USD $8.326 billion) in public expenditures provided for in the budget approved by Congress last year.

Bolsonaro also presented to Congress a project to reform Brazil’s troubled pension system, which is considered vital both to set in order Brazil’s public spending and to boost the economy; the legislation has already passed its first vote in the lower house.

The deficit in the Brazilian public sector accumulated so far this year is equivalent to 5.35% of Brazil’s Gross Domestic Product (GDP), a significant improvement upon the figure of 6.53% of GDP in the first half of 2018, and 7.53% in the same time period in 2017.

According to the report released by the Central Bank, the nominal public deficit of Brazil over the course of the last twelve months amounted to 456.8 billion reais (about USD $121.192 billion dollars), equivalent to 6.54% of GDP.

In 2018, Brazil registered a nominal deficit in its public accounts of 487.442 billion reais (about USD $124,985 billion), equivalent to 7.14% of GDP and the lowest in the last four years.

Brazil’s deficit amounted to 10.22% of GDP in 2015 and 8.98% of GDP in 2016, but was reduced by fiscal measures promoted by the then president, Michel Temer, who decreed the freezing of public expenses, a strategy now reinforced by Bolsonaro.

In June, the negative balance in the public accounts was 30 billion reais (about USD $7.9 billion), a value 48.05% lower than the same month last year.

The balance in public accounts measures the difference between the income and the expenses of the state in general, including those of the central government, state companies, and the regional and municipal administrations, as well as the resources destined for the payment of interest on debt.

The Central Bank also reported that the Brazilian national debt rose in March to 5,498 trillion reais (about USD $1.488 trillion dollars), equivalent to 78.7% of GDP, a slight increase from 77.2% of GDP, where it stood in December of 2018.

In April, however Brazil’s national debt stood at 79.1% of GDP, its highest level since the data began to be measured with the current criteria in December 2001.

This is one of the indicators that most worries the risk rating agencies, since, according to the data of the International Monetary Fund, the gross debt of other emerging countries such as Brazil is less than 50% of GDP.

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