Brazilian current account balance likely to have improved further in May

Brazil’s current account balance is likely to have improved further in May, turning into surplu. The country is expected to have recorded a surplus of USD 1904 million in May as compared with the deficit of USD 3384 million a year ago, said Societe Generale in a research report.

In 2015, the nation had registered current account deficit of USD 58.9 billion, an improvement from the deficit of USD 104.2 billion in the previous year. In 2016, the current account balance continued to recover at a sharper rate due to rising trade surplus. The country has been registering trade surplus in 2016 on falling imports and stabilizing exports.

Brazil’s improving current account balance trend is expected to bolster further in the coming months given the recent recovery in prices of commodity and continued weakness in home. This suggests that the country’s current account deficit is expected to further narrow to 1.8 percent of GDP in 2016, added Societe Generale.

Even if the global economic growth scenario continues to be weak, it outperforms Brazil’s economy by a broader margin. Therefore, there is a higher possibility that the current account will continue to improve in the medium term. But, if the Brazilian economy rebounds quicker than anticipated, imports will also grow faster. This will result in slight deterioration in the overall current account balance in the medium to long term. Currently, there is a very low chance of this likelihood, according to Societe Generale.