Brazil Public debt forecast to reach 84% of GDP by 2018

Brazilian public-debt forecasts for the next few years are raising concern. The gross debt, which ended 2015 at 66.2% of GDP, could reach nearly 84% in 2018 according to Itaú projections. The level that excludes foreign reserves from the gross debt could also rise, going to 58% of GDP in 2018 from 42% last year. Itaú expects the public sector to continue posting primary deficits in the period, marked by very weak economic performance and high real interest rates.

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There will be no surplus and the government knows it

Before defining how much of this year’s budget it will cut, the government will have to take a much more difficult decision. President Dilma Rousseff and her economic ministers will have to evaluate whether it is worth keeping the illusion that it’s possible to achieve the primary-surplus target of 0.5% of GDP. This is the first time in which the year begins with all private and government economists aware that the fiscal target is a mirage. The best option for the government may be showing full transparency to society on the gloomy situation of public accounts.