Brazil Expected to Register Negative Fiscal Results in 2017

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Government officials in Brazil admitted on Thursday that it will be very difficult not to register a negative fiscal target in 2017. The previous forecast for next year was that of a zero primary surplus, but after a wage increase for all federal employees was announced earlier this month, the outlook is more grim.

“It will not be possible to fulfill what was in the LDO (Budget Bill), which was a zero target. We will have negative results, for sure, ” said Planning Minister, Dyogo Oliveira before the Joint Budget Committee.

Economists say Brazil’s deficit problem is hindered by the drastic decrease in federal revenues as well as a continuing increase in spending. At the end of May Brazil’s interim government announced economic measures to try to improve the country’s ailing economy, by cutting down spending and reducing Brazil’s public debt.

Finance Minister, Henrique Meirelles, said that one of the measures include the creation of a ceiling limit for the public spending whereas the spending of the year would not exceed the volume of the previous year plus inflation. The announcement, however, was followed by news that wage increases for all federal employees were approved on June 2nd by the Chamber of Deputies.

Earlier this week, the Planning Ministry issued a revision on the impact of these wage increases until 2018. The impact, according to officials will be of R$67.7 billion and not R$52.9 billion as previously announced.

Brazil’s 2015 primary deficit closed at R$111.249 billion the worst deficit since 2001, representing 1.88 percent of the country’s GDP. The forecast by the country’s interim government for this year is even worse. Officials estimate that the primary budget deficit will reach R$170.5 billion in 2016, approximately 2.5 percent of the country’s GDP.