2017.08.1613:20:00UTC+00BRAZIL: Primary Deficit Target For 2017 And 2018 Increased To R$ 159 Billion

The Brazilian government has decided to raise the central government's primary deficit target for this year and the next to R$ 159 billion (US$ 49.72 billion), said Finance Minister Henrique Meirelles. Until then, this year's goal was at R$ 139 billion (US$ 43.47 billion), while that of the following year was R$ 129 billion (US$ 40.34 billion).

"This change is not a result of an increase in expenses, as it has been many times before. There was a very sharp drop in revenues, mainly due to something positive for the country, which is the falling inflation," Meirelles told a news conference.

The federal government also changed forecasts for the primary result for 2019 and 2020. By 2019, the primary deficit forecast went to R$ 139 billion, from R$ 65 billion, while for 2020 the expectation is now a negative primary result of R$ 65 billion, compared to an earlier estimate of a R$ 10 billion surplus. The minister added that the public accounts should return to have a positive primary result only in 2021, at R$ 10 billion.

The Brazilian government revenues in 2017 were below estimates. According to its July report on revenues and expenditures, the government had to increase the spending cut by R$ 5.9 billion and increase a tax on fuels to offset this effect.

Meirelles said that the definition of the target was not contentious.

"There was no debate, there was no disagreement, there was no discussion in that regard. [If] there were government wings that proposed a higher goal and then decided on a smaller target, I did not see that," he said.

"It is a technical change, based on reality, so there was no political component or winners and losers within the government," said Meirelles, adding that he does not expect changes in the rating due to the revision of the fiscal target.

During the press conference, the rating agency Standard and Poor's (S&P) announced that it had kept Brazil's credit note at 'BB' with negative outlook. Until then, the note was under watch for potential downgrade.