C/A Deficit Forecast Readjusted

July 2008 | Data Release

Brazil's current account continued to push deeper into deficit in June, accumulating US$17.4bn on the year, compared to a US$4.1bn surplus during the same period in 2007. A 44.7% y-o-y drop in the year-to-date merchandise trade balance in June, along with a 41.4% and 56.8% y-o-y widening of the service and income balance deficits, respectively, have driven the current account deeper into the red. With the year-to-date current account deficit now accounting for almost 80% of our full-year current account forecast, we believe that our previous 1.4% of GDP 2008 deficit target is now looking overly optimistic. We are therefore revising up our 2008 current account deficit forecast to 1.9% of GDP, on the back of the rapidly shrinking trade surplus and a sharp widening of the income deficit in Brazil.

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