November 12, 2019 / 4:59 PM / a month ago

Brazil oil auction flop to dent 2020 government revenues: survey

BRASILIA (Reuters) - Economists have lowered their forecasts for the Brazilian government’s primary budget primary deficit this year but raised it for next year, an economy ministry survey showed on Tuesday.

The expected increase in the 2020 deficit compared with forecasts a month ago follows the disappointing ‘Transfer of Rights’ oil auction last week that analysts say will put a dent in government revenues next year.

According to the ministry’s latest monthly ‘Prisma’ survey, economists predict a deficit of 87.53 billion reais ($21 billion) this year for the Treasury, social security and central bank accounts this year before interest payments are factored in, and 82.70 billion reais next year.

Last month, economists projected deficits of 99.19 billion reais this year and 75 billion reais next year. Projections for both years are still well below the government’s goals of 139 billion reais and 124.1 billion reais, respectively.

Under the rules of the oil auction, because there was no premium on the blocks sold, the winning companies will have to pay the full signing bonus of 70 billion reais to the government this year. If the auction had been more successful with higher bids, part of the bonus would be paid in 2020.

Shortly after the auction, special secretary to the economy ministry Waldery Rodrigues said that this year’s fiscal deficit should be between 82 billion and 85 billion reais.

The Prisma survey also showed that economists expect Brazil’s gross debt as a share of gross domestic product this year to be 78.60%, unchanged from a month ago, and 79.55% next year, also little changed from last month.

Brazil’s debt hit a record high 79.8% of GDP in August, and last month, the Treasury said it expected Brazil’s national debt to peak at a new all-time high of 81.8% of GDP in 2022 before reversing course the year after.

Reporting by Isabel Versiani; Writing by Jamie McGeever; Editing by Marguerita Choy

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