Deficit totaled R$35.9bn, lower only than that of July 2020, when the result was negative R$109.6 billion
08/31/2023
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Rafaela Vitoria, Banco Inter’s chief economist — Foto: Ana Paula Paiva/Valor
The federal government last month posted the second-largest primary deficit for the month since 1997, in data already adjusted for inflation. The deficit of July this year was negative at R$35.9 billion, lower only than that of July 2020, the first year of the pandemic, when the result was negative at R$109.6 billion, according to the National Treasury.
In a press conference to comment on last month’s figures, David Rebelo Athayde, the undersecretary of strategic planning for fiscal policy, said that “everything is going so that we have” a deficit of 1% of GDP this year. In the 12 months to July, the result was negative in R$97 billion, equivalent to 0.95% of GDP. The data considers the National Treasury, Social Security, and the Central Bank and excludes spending on public debt. The ministries of Finance and Planning and Budget are currently projecting a negative result of R$145.4 billion for 2023, but in practice, they work with a kind of informal deficit projection of around R$100 billion, or 1% of GDP.
In the interview, Mr. Athayde said the results through July were “in line” with the deficit estimate of 1% of GDP. He pointed out that “one-off” effects that helped boost revenues last year are not present in 2023. Some examples are the capitalization of Eletrobras, the large volume of dividends paid by Petrobras to the federal government, and the high profits of commodity companies, especially in the oil sector.
In comparison with the same period in 2022, the net revenue during the year had a decrease of 5.3%, discounted the inflation. The decline was also 5.3% when comparing only July of this year with the same period last year.
Nevertheless, the undersecretary said that “you can expect an improvement in revenue” in the second half of 2023, due to measures already adopted, such as the recharge of federal taxes on fuels and changes in the credits of the tax on the sales tax ICMS.
Total expenses increased 8.7% compared to the same period last year. Compared to July, the increase was 31.3%.
Mr. Athayde said that the numbers grew because of the payment of court-ordered debts, the so-called “precatórios,” brought forward. According to him, all the writs of payment that the federal government had to honor this year have already been paid, while in the past there were still “precatórios” to be paid in August. The undersecretary also recalled that the end of the year is usually marked by an accumulation of funds in the ministries, which helps to improve the primary result of the federal government.
Fábio Serrano, an economist at BTG Pactual, said that “the movements captured by the July data do not” alter the projection of a deficit of R$94 billion made by the financial institution. That’s because “the negative surprise in the month reflects one-off factors that will be offset in the coming months.” BTG Pactual calculated a negative result of R$32.9 billion in July, a deficit of R$3 billion lower than the real result.
According to Mr. Serrano, the difference can be explained by the expenses assumed last month as a form of financial support, related to the Aldir Blanc and Paulo Gustavo laws, both to foster cultural activities and the “compensation for the reduction” of the ICMS, to states and municipalities. “The timing of the measures was uncertain, and we distributed the expenses evenly over the following months of the year,” he said. The economist also said that “the most intense deceleration of the primary [result] was also expected.”
For its part, Santander calculates a deficit of R$115 billion. In a report in English, Ítalo Franca, an economist at the financial institution, said that the trend is for the monthly results to “lose strength” from September. This movement would be influenced by an already scheduled “increase in expenses” and a “more modest growth in revenues,” benefiting from the measures adopted by the federal government on the revenue side.
Rafaela Vitoria, chief economist at Banco Inter, is likely to revise this year’s deficit forecast to R$120 billion from R$90 billion.
“This increase in spending, combined with the drop in revenues due to the slowdown in economic activity and the fall in commodity prices, casts even more doubt on the government’s goal of reducing the primary deficit to zero by 2024,” she said.
*Por Estevão Taiar — Brasília
Source: Valor International