Brazil July net debt to GDP 63.723%; est. 63.4%

Brazil July net debt to GDP 63.723%; est. 63.4%

Brazil's government reported a primary budget deficit of 59.124 billion reais ($10.9 billion) in July, as per Treasury data released on Thursday. This figure represents a significant increase compared to the same period last year, where the deficit was 9.7 billion reais, and is more than six times the previous year's deficit [1].

The surge in the deficit can be attributed to a 28.3% inflation-adjusted rise in government spending, driven primarily by court-ordered payments and pension benefits. Meanwhile, net revenue rose by 3.9%, bolstered by higher tax collections. Analysts polled by Reuters had predicted a primary deficit of 58.55 billion reais, indicating that the actual deficit was close to their estimates [1].

The July primary deficit marks the worst month for the month since 2020, when it reached 120.6 billion reais due to high COVID-19 pandemic-related expenses. The year-over-year jump in the deficit was exacerbated by the postponement of government court-ordered payments to July, which were made in the first half of the year last year [1].

Over the past 12 months, Brazil's primary deficit has amounted to 34.1 billion reais, equivalent to 0.3% of the country's gross domestic product (GDP). This figure falls short of the government's official target for 2025, which was set at a zero-figure deficit with a tolerance band of 0.25% of GDP in either direction [1].

Separately, Brazil's economists have revised their GDP growth forecast for 2025 downward to 2.18% from the previous estimate of 2.21%. This adjustment reflects a range of economic factors, including the impact of U.S. tariffs, fiscal sustainability concerns, and global market sentiment [2].

The Brazilian economy has shown resilience, with robust tax revenues and an upward revision in economic growth potential. Federal tax revenue reached a record R$2.65 trillion ($427.42 billion) in 2024, driven by a 3.5% GDP growth and new taxes on high-net-worth individuals and offshore assets. However, this revenue surge depends heavily on a few sources, raising fiscal sustainability concerns amid a 76.1% debt-to-GDP ratio and a 15% Selic rate [2].

The CFTC BRL Speculative Net Positions report, released on August 21, 2025, provided insights into investor sentiment toward the Brazilian real. The report showed that the real was stabilized near R$5.4825, which is pivotal for assessing speculative confidence in the Brazilian real, especially under U.S. tariff pressures and a 76.1% debt-to-GDP ratio [2].

Global markets were cautious on August 21, 2025, with the S&P 500 down 0.4%, the Dow Jones Industrial Average down 0.3%, and the Nasdaq down 0.7%. U.S. data showed a flash Composite PMI of 55.4, indicating growth, but initial jobless claims rose to 235,000, suggesting a cooling labor market [2].

The revised GDP forecast and the primary budget deficit reflect the complex interplay of domestic and external factors. While Brazil’s economy has shown resilience, the challenges posed by U.S. tariffs and fiscal sustainability concerns remain significant. Investors and financial professionals should closely monitor the upcoming CFTC BRL Speculative Net Positions report and U.S. data releases for further insights into Brazil’s economic outlook.

References:
[1] https://money.usnews.com/investing/news/articles/2025-08-28/brazils-central-government-posts-10-9-billion-primary-deficit-in-july
[2] https://www.ainvest.com/news/brazil-economists-forecast-2-18-2025-gdp-prior-2-21-2508/