BRASÍLIA: The Brazilian government could set a primary budget deficit goal of around 150 billion reais for 2017 as federal revenue remains subdued due to a two-year recession, a government source told Reuters on Thursday. The steep deficit raises questions about the austerity drive of interim President Michel Temer and his economic “dream team” led by former central bank chief Henrique Meirelles.
“It will be hard to lower the deficit and 150 billion reais is the best number for now,” said the official, who asked not to be named. The government’s economic team is expected to unveil the deficit goal next week.
Meirelles, who is now finance minister, said earlier on Thursday the government will aim for the 2017 deficit to be smaller than the 170.5 billion reais ($53.52 billion) expected for this year. However, he acknowledged the shortfall will be above 100 billion reais as there are doubts about the government’s capacity to increase revenues with a recession in its second year.
“Temer’s austerity speech has not yet turned into reality and that will hurt the credibility of his government and Meirelles,” said Alex Agostini, chief economist with Austin Rating in Sao Paulo. Agostini said a large deficit allows Temer to score political points by increasing spending on popular government programs and pork barrel. A finance ministry spokesman could not be immediately reached for comment.
