Brazil economy: primary surplus revised downward, from 1,1% to 0,15%

Brazil Economy — The Brazilian government has revised downward its goal of primary surplus for 2015, from 1.1% to 0.15%, given the worsening crisis and declining tax revenues.

The government will also submit to Parliament a series of new budgetary savings of 8.6 billion reais (2.66 billion dollars) which will bring the total cuts to 79.4 billion reais (24 billion USD) in 2015, announced the Ministry of Planning in a statement.

The Sao Paulo Stock Exchange, which had anticipated this expected announcement, finished down 1.08%.

The worsening economic situation in Brazil since the beginning of the year “has had an impact on tax revenues and, despite the measures taken by the government to increase revenue — through tax increases — and to reduce mandatory spending, it appears that the initial primary surplus target will not be achieved,” said the government.

The seventh largest economy in the world economy is expected to experience a contraction of gross domestic product (GDP) of 1.5 to 1.7% according to analysts, while inflation and unemployment will continue to rise.

“We need to revise our primary surplus target in view of changes in tax revenues that we have observed so far in order to reduce uncertainty,” said the economy minister Joaquim Levy, during a joint press conference with his colleague from the Ministry of Planning Nelson Barbosa.

The Latin American emerging giant posted in May on the last 12 months a primary deficit equivalent to 0.68% of GDP.

“We are seeking to re-balance public accounts because it is essential to recover growth,” explained a few hours before the president Dilma Rousseff.

Meanwhile, Ms. Rousseff has reached a record unpopularity, due to revelations about the corruption scandal around the state oil company Petrobras, but also due to unpopular austerity measures adopted since January which contradict the commitments of her in 2014.

Weakened politically, the government also had great difficulties in passing these austerity measures in Parliament where it no longer has a stable majority because of serious friction within the governmental coalition.