October 27, 2016 / 5:22 PM / a year ago

UPDATE 1-Brazil's central government deficit widens in September

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BRASILIA, Oct 27 (Reuters) - Brazil’s central government budget deficit widened more than expected in September as a deepening recession hurt tax revenues, the Finance Ministry said on Thursday.

Brazil’s central government primary deficit rose to 25.303 billion reais ($8.027 billion) in September from 20.345 billion reais in August.

It was the biggest shortfall for September since the current data series began in 1997.

The central government, which includes federal ministries, social security and the central bank, had been expected to post a deficit of 23.780 billion reais, according to the median forecast in a Reuters poll of 11 economists.

Finance Ministry data earlier on Thursday showed federal tax revenues fell 8.27 percent from September 2015, also missing market expectations.

“Slumping economic activity explains a lot of that. Companies are also facing a lot of cashflow and credit problems, making them delay tax payments,” economists with local consultancy Rosenberg Associados wrote in a note to clients.

Brazil’s severest recession in at least eight decades has taken a turn for the worse in recent months, frustrating economists who expected it to stabilize following the impeachment of unpopular President Dilma Rousseff.

Business and consumer confidence have lifted off record lows but measures of economic activity including industrial output, retail sales and services growth have fallen sharply, suggesting a mild recovery will only start in early 2017.

Brazil’s central government primary deficit so far this year rose to 96.633 billion reais, the Finance Ministry said.

The central bank will release on Monday the September public sector primary deficit, which includes states and municipalities. Economists in a monthly poll by the Finance Ministry have forecast a 2016 deficit of 159.9 billion reais, slightly better than an official target of 163.9 billion reais. ($1 = 3.1521 Brazilian reais) (Reporting by Marcela Ayres; Writing by Silvio Cascione; Editing by James Dalgleish)

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