Current Account Deterioration To Continue
BMI View: While we are adjusting our current account forecasts for Brazil for the next few years to reflect narrower shortfalls, we maintain our view that further deterioration is ahead. This is underpinned by our view that export growth will remain modest and imports will tick higher, in line with a recovery in the manufacturing sector, keeping the trade account in deficit.
We are adjusting our current account outlook for Brazil to reflect slightly narrower deficits in the coming years, although we continue to anticipate deterioration. Indeed, we now estimate that Brazil's current account shortfall came in at 3.7% of GDP in 2013, narrower than our previous 4.1% forecast, in light of stronger goods and services exports than we anticipated in recent months ( see 'Rebalancing Pressures To Continue Weighing On Current Account', October 2 2013). Moreover, with both likely to continue providing a modest boost to the current account balance in 2014, we are adjusting our current account deficit forecast to 4.2% of GDP, from 4.3% of GDP previously. Despite these changes, our long-held view for a significant deterioration in Brazil's current account balance, on the back of structurally weaker export growth and a moderate rebound in import growth, remains in place. We estimate that Brazil posted its first trade deficit in over a decade in 2013, at a modest US$200mn, and we expect the trade account to remain in the red in the red through 2016.
Trade Deficit Here To Stay
|Little Respite Ahead|
|Brazil - Current Account Components, US$mn|