* Gov’t lowers primary surplus goal to 2.1 pct of GDP
* Drop in tax revenues hits gov’t finances
By Luciana Otoni
BRASILIA, Aug 29 (Reuters) - The Brazilian government on Thursday set a lower primary budget surplus goal for 2014 in an attempt to be more transparent about its finances, but economists warned it may still fail to meet that target in an election year.
Finance Minister Guido Mantega said the government will aim for a primary surplus, or the excess government revenue before debt payments, equivalent to 2.1 percent of gross domestic product next year.
President Dilma Rousseff’s government reduced this year’s goal to 2.3 percent of GDP as a sharp economic lowdown and a flurry of tax breaks caused a sharp drop in revenues. The target initially set for 2013 was 3.1 percent of GDP.
“If our estimates do not materialize we will revise them,” Mantega said during the presentation of the 2014 budget bill. “We could freeze some spending.”
Economists have urged the administration to show it is fully committed to the tough fiscal rules that helped stabilize an economy that, up to a decade ago, was battered by repeated crises.
“There is no doubt that the government is trying to be more transparent in this bill. However, it seems unlikely they will be able to meet that reduced goal during an election year,” Rafael Bistafa, economist with Rosenberg & Associados in Sao Paulo.
He said that the government’s fiscal stance remains expansionary in the 2014 budget bill, which could complicate efforts to reduce high inflation in Latin America’s top economy.
Rousseff, a leftist economist, is widely expected to run for re-election next year, possibly boosting public spending to attract potential voters.
Lawmakers are also trying to extend their powers in the budget, a move that could spur more spending in coming years.
Yields on interest rate future contracts rose on Thursday partly due to the budget bill, which suggests more inflationary pressures ahead, Citi analyst Lam Kenneth said in a note to clients. The Brazilian central bank hiked interest rates for the fourth straight time on Wednesday to contain a surge in prices that threatens to derail a slow economic recovery.
The government sees the economy growing 4 percent in 2014, Mantega said, way above private economists’ estimates of about 2.4 percent that year. Inflation would slow to about 5 percent in 2014, according to the budget bill, below most analysts’ estimates of 5.8 percent.