By Jamie McGeever
BRASILIA (Reuters) – Brazil’s government on Friday sharply revised its 2020 budget deficit forecast to a record 540.5 billion reais ($97 billion), reflecting the huge hit to revenues and need for emergency spending caused by the coronavirus crisis.
The deficit excluding interest payments for the Treasury, central bank and social security is more than four times wider than the 124.1 billion reais shortfall originally projected at the start of the year.
Due to the economic and public health crisis, the government was exempted from meeting that target, and the Economy Ministry’s previous bimonthly revenue and expenditure report in March penciled in a deficit goal of 161.6 billion reais.
In its latest report on Friday, the ministry lowered its 2020 revenue estimate by 111.2 billion reais to 1.21 trillion reais, and raised its primary spending forecast by 267.7 bln reais to 1.75 trillion reais.
Brazil’s economy is on course for its steepest annual downturn since records began in 1900. The government expects GDP to contract by 4.7%. The consensus in the central bank’s latest weekly survey of economists is for a 5.1% fall.
These predictions may already look optimistic. Swiss bank UBS on Thursday became the latest in a clutch of banks to slash their GDP forecast to show a fall of 7% or more.
Using the Economy Ministry’s own estimate for a 7.15 trillion reais economy this year, the 540.5 bln reais deficit would be worth around 7.5% of gross domestic product.
Treasury Secretary Mansueto Almeida had said this week that the primary budget deficit could end up exceeding 700 billion reais, or more than 9% of GDP.
The Economy Ministry said on Thursday that emergency spending measures will have a 344.6 billion reais impact on this year’s primary budget balance.
Separately, federal tax revenues slumped 29% in April to 101.15 billion reais the lowest tax take for that month since records began in 2007.
(Reporting by Marcela Ayres and Jamie McGeever, Editing by Franklin Paul and David Gregorio)
