2023-07-21 20:50:30
© Reuters. R$1 coins 10/15/2010 REUTERS/Bruno Domingos
By Fabricio de Castro and Camila Moreira
SÃO PAULO (Reuters) – The Ministries of Planning and Finance projected this Friday that the central government will close 2023 with a primary deficit of 145.4 billion reais, equivalent to 1.4% of the Gross Domestic Product (GDP), a worse result than forecast in May, of 136.2 billion reais (1.3% of GDP), according to the bimonthly report of revenues and expenses.
Despite the result, the Federal Budget Secretary, Paulo Bijos, pointed out during a press conference about the numbers that the fiscal target authorized in the Budgetary Guidelines Law (LDO) for 2023 is a deficit of 238 billion reais and that the government remains below it.
The government has been working with the expectation that the primary deficit in 2023 will be around 1% of the Gross Domestic Product (GDP). In 2024, this deficit would be zeroed.
In the report presented this Friday, however, the projected deficit of 145.4 billion reais in 2023 is equivalent to 1.4% of GDP.
“We continue to recognize that the scenario is challenging, but credible”, commented Bijos, when asked about the possibility of reaching the 1% target.
“Our perspective continues to be a primary deficit of 1%”, reinforced the deputy secretary of the National Treasury, Viviane Varga, who was also present at the press conference. “Nothing changes in relation to the planned trajectory, the idea of reaching a primary deficit of 1% of GDP in 2023 remains.”
After starting management in 2023 with a forecast of a fiscal gap of more than 200 billion reais in the year, the Minister of Finance, Fernando Haddad, has been announcing measures with the aim of reducing this gap.
Among the actions already implemented to increase collections are fuel recharging and a program to renegotiate tax debts. The minister is still trying to change the operating rules of the Tax Resources Administration Council (Carf) and intends to send Congress a project to tax online sports betting, in addition to promoting changes in income taxation.
According to the accounts of the portfolios included in the third bimonthly report of revenues and expenses for the year, the projection of net revenues increased by 103.6 billion reais in relation to the LOA, to 1.900 trillion reais.
Meanwhile, the estimate for total primary expenditures increased by 20.8 billion reais from the LOA, to 2.055 trillion reais, amid an increase in forecast compensation to states and municipalities for ICMS losses.
This week, the Secretariat of Economic Policy (SPE) of the Treasury improved the official projection for the performance of economic activity in 2023 and began to see a growth of 2.5% for GDP, against a forecast of 1.9% made in May. Higher GDP growth tends to positively impact tax collection.
At the press conference, however, Bijos pointed out that improvements in macroeconomic indicators — such as inflation indices — are not necessarily reflected in improvements in fiscal performance. This is because the drop in inflation, for example, negatively impacts the collection of some taxes.
In the government’s calculations, there were reductions in the collection projections in 2023 of taxes such as Import Tax, PIS-Pasep and Confins.
EXPENSES CEILING
According to the report, this year’s Budget also has an expenditure surplus of 3.2 billion reais in relation to the spending ceiling limit, which indicates the need to block discretionary funds in that amount. In May, there was an estimated restriction of 1.7 billion reais.
During the interview, Bijos confirmed the need for additional blocking of primary discretionary expenses to comply with the cap.
The secretary also pointed out that in the Annual Budget Law Project (PLOA), which needs to be sent to Congress by the end of August, the government intends to consider the collection to be obtained from new sources that will appear in projects to be sent to the Legislative.
According to Bijos, the legislation allows the collection of “filed legislative proposals, not necessarily approved”, to be considered in the PLOA.
(By Camila Moreira and Fabrício de Castro)
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