Rating agency Moody’s predicts that Brazil will return to a primary deficit in 2022, despite the fiscal consolidation seen last year, amid higher interest rates and slowing growth.
“We expect Brazil to have a primary deficit of 1.6% and a fiscal deficit of 5.9% of GDP in 2022,” Moody’s said in a report dated Friday (7).
According to the agency, “the higher Selic rate will increase the government’s interest burden and challenge its fiscal balance, because the average cost of government financing closely follows” the basic interest.
The Central Bank raised the benchmark interest rate by 1.5 percentage points to 10.75% per annum at its last monetary policy meeting.
The most recent Focus survey by the municipality showed that economists project an even higher Selic, at 11.75%, by the end of 2022.
Moody’s said in the report that Brazil’s strong fiscal performance last year will support the country’s credit profile, but “we expect the debt burden to rise again next year and a primary deficit to return due to weak growth.”
In 2021, the Brazilian consolidated public sector recorded a primary surplus of BRL 64.727 billion, equivalent to 0.75% GDP, the first positive annual result in eight years, the Central Bank reported last week.
Brazil’s Gross Domestic Product is expected to grow 0.6% in 2022, according to Moody’s projections released in mid-December.
Source: CNN Brasil
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