Brazil’s current account balance to continue rebounding in 2016 on declining imports

Brazil’s current account balance rebounded last year to a deficit of 58.9 billion from a deficit of 104.2 billion in 2014. However, the data surprised to the downside in February. The current account’s annual pace of recovery fell behind that of the trade balance for the first time since December 2014. This was due to increase in remittance outflows in February because of greater dividend payments. However, the current account balance is likely to keep improving and reach –USD 759 million, consistent with the rebound in trade and other components, according to Societe Generale.

After a sharp contraction of imports, the balance of trade continues to recover at a remarkable rate. The rate of decline in exports continues to indicate the global demand weakness for Brazilian goods. Meanwhile, the declining imports highlight the weak domestic demand that is not expected to recover soon. This is expected to help the current account balance improve in 2016, noted Societe Generale.

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