Brazil's Current Account To Widen As Export Windfall Fades

  • Brazil's current account deficit will widen over the coming quarters as global commodity prices trend lower and export earnings correspondingly revert. Fitch Solutions estimates Brazil's current account shortfall at 0.6% of GDP in 2021, its narrowest since 2007, which reflected surging goods export earnings and constraints on service imports (via mobility restrictions that curtailed outbound tourism).  
  • Fitch Solutions forecast Brazil's current account deficit will widen to 2.3% of GDP in 2022, as lower average global commodity prices see export earnings revert after a windfall year, narrowing the goods trade surplus. 
  • With global travel restrictions likely to be significantly looser over the coming year, a revival of outbound tourism will likely widen the services trade deficit. 
  • Capital inflows are likely to be volatile, as the approaching general election will likely drive wide swings in investor sentiment that could result in periods of funding shortfalls.

(Source: Fitch Solutions)