Brazilian Current Account Deficit To Narrow Slightly In 2023 As Imports Cool  

 

• Brazil’s current account deficit will narrow from 2.3% of GDP in 2022 to 2.1% of GDP in 2023, as import growth cools more rapidly than exports. Fitch’s forecast for 2022 is a revision from 1.9% previously, as the goods trade surplus has been narrower than anticipated.
• Notably, in the year through September, Brazil ran a current account deficit of USD29.6Bn, notably wider than at the same point in 2021, and is on track to post the widest deficit since before the pandemic.
• The widening of the overall deficit was driven by a larger services trade deficit, as Brazilians resumed outbound travel as the pandemic faded; and an expansion of the primary income deficit, as foreign companies have increased repatriations due to high commodity prices and stronger growth in Brazil.
• In 2023, goods export and import growth will both slow, as the world economy weakens. Consequently, Fitch forecast 5.1% growth in exports, and 3.2% in imports in 2023, widening the goods trade surplus from 2.1% of GDP in 2022 to 2.4%.
• On the export front, it is expected that prices for Brazil’s primary commodity exports – including iron ore, soybeans, coffee and crude oil – will ease, with none likely to return to the highs seen in H1 2022. While on the import front, moderating commodity prices will cut the cost of Brazil’s import bill.

(Source: Fitch Solutions)