UPDATE 3-Brazil slashes fiscal surplus goal as downturn hits revenues
(Adds change in targets and spending cuts, Levy and analyst comments)
By Alonso Soto
BRASILIA, July 22 (Reuters) - Brazil dramatically lowered its fiscal savings goals for 2015 and 2016 on Wednesday, due to plunging tax revenues, and announced new spending cuts to underscore its commitment to austerity amid a steep economic downturn.
The government cut its primary surplus goal for this year to 8.7 billion reais or 0.15 percent of gross domestic product from 66.3 billion reais, the equivalent of 1.1 percent of GDP, originally budgeted.
The primary surplus, or revenue available to meet interest payments on debt, is closely watched by markets and credit rating agencies as a gauge of a country's capacity to repay its debt. The agencies have warned they may further downgrade Brazil, a move which could undermine investor confidence and raise borrowing costs.
The steeper-than-expected cuts in the primary surplus targets could complicate President Dilma Rousseff's bid to regain the confidence of investors as Latin America's largest economy heads into its worst recession in 25 years.
"The target revision should not be taken as a sign that we are abandoning the fiscal adjustment," Finance Minister Joaquim Levy told reporters in a presentation. "We are committed to fiscal discipline."
The government cut its 2016 primary surplus goal to 0.7 percent of GDP from 2 percent and to 1.3 percent for 2017.
Until a few years ago Brazil maintained primary surpluses above 3 percent of GDP as tighter spending controls and a commodities bonanza filled public coffers. Continuación...