The public finances of Brazil improved in October, Treasury figures showed on Thursday, as a seasonally expected monthly surplus helped reduce the government’s overall deficit this year and keep it on track to come in below target.
Still, the 8.7 billion reals ($2.1bn) primary budget surplus in October was less than economists had forecast and social security spending continued to rise, highlighting the underlying strains on the public accounts.
The country’s Treasury secretary, Mansueto Almeida, said there will be hardly any flexibility in the budget for the next two years, adding that public investment, already its lowest on record, will be more likely to fall further than rise.
“Don’t think that we will have much room for public investment in 2020 or 2021. Under our current rules, the trend for this spending in 2021 is that it will be lower than it is now,” Almeida told reporters in Brasilia, the country’s capital.
Almeida also said the government is on track to post a nominal deficit this year of about 6 percent of gross domestic product and register an increase in gross public debt far lower than anticipated.
Almeida was speaking after Treasury figures showed the central government’s primary budget surplus in October was less than the 10.7 billion reals ($2.55bn) surplus median forecast in a Reuters poll, and 11.0 percent smaller than the 9.5 billion reals ($ 2.26bn) surplus posted in the same month last year.
October tends to be a surplus month, thanks to the inflow of oil-related funds and corporate and income tax intakes.
The year-to-date primary deficit, before interest payments are taken into account, narrowed to 63.85 billion reals ($15.25bn) 14.8 percent less in real terms compared with the first 10 months of last year, the Treasury said.
In the 12 months to October, the primary deficit stood at 113.1 billion reals ($26.99bn), or 1.1 percent of gross domestic product, down from 1.3 percent of GDP a year ago. The government’s 2019 target is for a deficit of 139 billion reals ($33.18bn)
But social security spending rose 8 percent in the same month a year ago to 14.6 billion reals ($3.5bn). That swelled the accumulated social security deficit so far this year to 179.9 billion reals ($42.94bn), some 3 percent wider than a year ago, Treasury figures showed.