BRASILIA (Reuters) – Brazil should end 2024 with a primary deficit of 55.3 billion reais ($11.2 billion), the federal audit court (TCU) said, in the latest sign of skepticism that President Luiz Inacio Lula da Silva’s government can meet its pledge to eliminate the fiscal deficit.
After Lula upped spending on social measures in his first full year in office, the market is worried his administration won’t meet its fiscal goals. Despite falling interest rates, long-term future interest rates remain high, underlining market discomfort with the government’s fiscal situation.
In a late-Wednesday report, the technical area of the TCU said the government’s anticipated revenue growth was based on “various measures whose consequences are still not very clear or predictable.”
The government’s forecast of net primary revenue reaching 19.2% of gross domestic product (GDP), the highest level since 2010, signifies a “value much above what has been observed in recent years, indicating a possible overestimation,” it added.
Planning Minister Simone Tebet defended the government’s revenue expectations, telling journalists on Thursday they were “reasonable.”
Utilizing the same revenue level observed in 2022 and the government’s projected expense for this year, the TCU projected that the primary deficit for this year would reach 0.5% of GDP.
The TCU’s outlook is in line with other market players, and comes despite the approval of government fiscal measures to boost revenue at the end of 2023.
“In the legislative process, the measures were naturally dehydrated,” Marcus Pestana, former federal deputy and executive director of the Senate’s Independent Fiscal Institution (IFI), said of the government’s fiscal package.
Private economists surveyed by the central bank in the weekly Focus survey continue to project a primary deficit equivalent to 0.8% of GDP – a level virtually unchanged since October, well above the zero target for the year, which allows for a variation band of 0.25% of GDP in either direction.
(Reporting by Marcela Ayres and Bernardo Caram; Editing by Nick Zieminski)