January 31, 2020 / 1:41 PM / 25 days ago

UPDATE 1-Brazil posts public sector deficit 0.85% of GDP, smallest since 2014

(Adds detail, PIX available)

By Marcela Ayres and Jamie McGeever

BRASILIA, Jan 31 (Reuters) - Brazil’s public finances improved markedly last year as the primary deficit for 2019 came in at less than half the government’s forecast, while the national debt fell to its lowest in over 18 months, central bank figures on Friday showed.

The figures are likely to be seized on by Economy Ministry officials as evidence that their efforts to boost confidence in Brazil by putting the public accounts on a more stable footing, via aggressive budget squeezes and freezes, is paying off.

However, it was still the sixth consecutive year of deficit, economists noted, warning that the overall debt load and interest payments remain high.

The public sector’s accumulated primary deficit in 2019, before interest payments are factored in, totaled 61.87 billion reais ($14.6 billion), the central bank said, less than half the government’s official target of a 132 billion reais shortfall.

That was down from the previous year’s deficit of 108.3 billion reais and equated to 0.85% of gross domestic product, also sharply down from 1.57% of GDP in 2018 and the narrowest deficit as a share of the economy in five years.

For December, the primary deficit was 13.5 billion reais, three times the 4.4 billion reais shortfall predicted in a Reuters poll of economists but less than a third of the 41.13 billion reais deficit the same month a year earlier.

Including interest rate payments, Brazil’s public sector deficit in 2019 totaled 429.2 billion reais, or 5.91% of GDP. That compares with 487.4 billion reais, or 7.08% of GDP, the year before, the central bank said.

The decline in benchmark interest rates to new all-time lows last year helped reduce Brazil public sector interest rate bill to 367.3 billion reais, or 5.06% of GDP, the lowest since 2013.

Brazil’s gross national debt ended 2019 at 75.8% of GDP, down from 77.6% in November and the lowest since May 2018, the figures showed.

$1 = 4.25 reais Reporting by Marcela Ayres and Jamie McGeever; editing by John Stonestreet and Nick Zieminski Writing by Jamie McGeever

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