Fiscal Policy: On a Deteriorating Path

BRAZIL ECONOMICS - Report 14 Jan 2014 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

Executive Summary

The primary surplus projections in the financial market are below the target, and the distance between the expected surplus and the target is widening. The government “fulfilled the commitment to the target” in 2013 only due to non-recurring revenues, which amounted to 0.9% of GDP, accounting tricks, and an increase in the unprocessed “remainders to pay” (budget funds allocated but not spent), which means an abnormally high shift of spending from 2013 to 2014. The non-recurring revenues have been growing more slowly than primary expenditures, which have been rising in proportion to GDP

​From analysis of the budget announced for 2014, the perspective is that the primary surplus this year will be still lower than last year. The monthly primary surpluses will fall short of the level needed to stabilize the ratio between the gross debt and GDP, much less to reduce it.

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