IMF: Brazil only to have primary surplus in four years

Emerging countries like Brazil face high levels of indebtedness

Published on 18/04/2018 - 15:26 By Leandra Felipe - United States

Brazil is only to have a primary surplus—a positive balance between government revenues and expenditure; interest not included—in 2022. The estimate was released Wednesday (Apr. 18) in the International Monetary Fund’s (IMF) Fiscal Monitor. The forecast made in October was that a balance in the accounts would be attained in 2021.

The prediction comes one week after the Brazilian government decided to retain its $41 billion deficit in public accounts for 2019, with negative figures up to 2021. The best estimate for the country’s gross domestic product (GDP)—2.3%, up 0.4% from the January forecast—is not enough to address the gap between public spending and revenue.

The fund estimates that the gross debt reaches 87.3% of the GDP this year—therefore above the 3% from last year, when it stood at 84%. For 2019, the gross debt is expected to surpass 90% of the GDP.

The IMF also notes that the country’s pension reform could spare approximately 9.5% of the GDP in the next ten years. Postponing it, however, is believed to delay stability.

Emerging countries like Brazil face high levels of indebtedness if compared to other countries in the same circumstances. Indebtedness in these economies will stand at 49% in 2018 overall and 51.2% next year. In Latin America, this percentage should reach 61.8% this year and 66.4% in 2019.

Global performance

The document also predicts a new record for the global debt, which has already hit a record high in 2016, adding up to $164 trillion, 225% of the global GDP. An increase was reported in the public and private debt over the last ten years, which makes governments more vulnerable to sudden changes in the financial system.

A recommendation made by the IMF for fiscal health is that the countries should use “the window of opportunities provided by economic growth to strengthen the state of their fiscal affairs.”

Translation: Fabrício Ferreira -  Edition: Maria Claudia/Mariana Branco

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