April 30, 2020 / 5:55 PM / a month ago

UPDATE 2-Brazil national debt jumps to 78.4% of GDP, nears new record

(Adds detail, comment)

By Jamie McGeever

BRASILIA, April 30 (Reuters) - Brazilian public sector debt and deficit figures for March released on Thursday gave a glimpse of the fiscal strain to come from the coronavirus crisis, as the national debt surged toward the highest on record and deficits widened sharply.

The public sector primary deficit in March was the widest in 18 months, the nominal deficit was the fourth largest in two decades, and the national debt posted its biggest month-on-month leap in at least 14 years.

With the lockdowns and sudden stop to large parts of the economy triggering a crisis-fighting spending splurge from the government and a slump in tax revenues, analysts say it is not a question of whether deficits and debt rises, but by how much.

“We expect the fiscal and public debt picture to deteriorate significantly in coming months,” Alberto Ramos, head of Latin American research at Goldman Sachs in New York, wrote in a note.

“We now expect the consolidated public sector to record a primary fiscal deficit of at least 8% of GDP (likely higher) ... leading to a sharp increase of gross public debt to close to 90% of GDP,” he said.

The overall public sector posted a primary budget deficit excluding interest payments of 23.7 billion reais ($4.3 billion) in March, the central bank said, slightly less than the 24.8 billion reais deficit forecast in a Reuters poll.

That was the widest primary deficit since September 2018. As a share of gross domestic product over the 12 months to March the primary deficit widened to 0.9%.

Treasury Secretary Mansueto Almeida said this week that the primary deficit this year will likely balloon to 600 billion reais, or 8% of GDP.

The nominal deficit swelled to 79.7 billion reais in March, the central bank said. According to their historical data, that was the fourth largest in 19 years, only behind three months during the 2015-16 recession.

Gross national debt rose to 5.76 trillion reais, or 78.4% of GDP, driven by increased gross debt issuance, nominal interest rates and the impact of a weaker currency, the central bank said.

The 1.7-percentage-point increase from February marked the biggest rise since at least 2006, according to Refinitiv data, and takes the national debt back up toward last year’s all-time high of 79% of GDP.

Net debt, however, fell to 51.1% of GDP, the lowest since September 2018, in large part due to the real’s 15.6% depreciation against the dollar in the month, the central bank said. (Reporting by Jamie McGeever and Marcela Ayres Writing by Jamie McGeever Editing by Chris Reese, Marguerita Choy and Jonathan Oatis)

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