Brazil likely recorded first current account surplus in around seven years in February

Brazil has likely recorded its first monthly current account surplus of $1,309m in February, as compared with January’s deficit of -$4,817m and February 2015’s deficit of -$7,175m. It is evident that weakness in domestic demand and the subsequent decline in imports helped the rebound in trade and overall current account balance considerably.  In 2015, the current account balance rebounded to -$58.9bn in 2015, from -$104.2bn in 2014.

In recent times, imports have been declining at rapid rate due to weak domestic demand, whereas exports appear to be gaining ground. In February 2016, exports recorded their first year-on-year growth in 20 months. This process is expected to see a rebound in current account in 2016.

“We forecast the 2016 and 2017 current account balance at -2.2% and -1.7% of GDP, respectively”, says Societe Generale.

However, a rapid recovery will need sustained growth in export that continues to face a challenging demand situation globally. Furthermore, it is not easy to argue that the current pace of export growth will be sufficient to help investment grow.