Brazil’s current account balance improving

Due to a sharp contraction in imports in June, Brazil's trade balance improved significantly to USD4527.5mn. As a result, the H1 trade balance in improved to USD2.2bn compared with a deficit of -USD2.5bn in H1 14 and -USD1.5bn in H2 14. 

The June trade balance also indicates that the current account deficit declined to -USD2238m in the same month and that it improved to -USD38.1bn in H1 15 from -USD50.0bn in H1 14 (-USD54.8bn in H2 14). Clearly, growth weakness at home is helping on the external front although export growth remains under pressure. Assuming the current account shows a similar improvement in H2 as well, Brazil is heading for a nearly 28% correction in the current account this year in dollar terms, estimates Societe Generale. 

"BRL is likely to depreciate closer to 30% this year, therefore, a slight improvement in the current account balance is expected. Moreover, such a steep pace of decline in imports also indicates serious deterioration of investment demand back home. As a result, a sustained improvement in the current account balance must be associated with improvements in exports. It remains to be seen if the BRL depreciation over the past year is sufficient to boost competitiveness and growth of Brazilian exports", says Societe Generale in a report on Monday.