Tag Archives: Economic events

UPDATE 2-Record Brazil Deficit, debt figures highlight the enormous challenges of public finances | Instant News

(Adding analyst comments)

By Jamie McGeever

BRAZILIA, July 31 (Reuters) – Brazil’s national debt rose to a record 85.5% of gross domestic product and the public sector recorded a record deficit of $ 36.5 billion in June, the central bank said on Friday, when the COVID-19 crisis hit government finance.

The figures are larger than economists had predicted, and came after senior officials at the Ministry of Economy and Treasury this week reaffirmed their commitment to the government spending limit, which is widely seen as the main pillar of public finance.

“We expect the picture of fiscal and public debt to worsen significantly throughout 2020,” said Alberto Ramos, head of Latin American research at Goldman Sachs, projecting a primary public sector deficit of at least 13% of GDP.

“Overcoming the dynamics of unsustainable public debt and building a fixed fiscal buffer is undoubtedly the main macro challenge facing both the executive and legislative branches after the pandemic is controlled,” he said.

The public sector deficit excluding interest payments was 188.7 billion reais ($ 36.5 billion) in June, the central bank said, more than 163.5 billion reais which is expected to cause a deficit in the first half of this year to 402.7 billion reais .

The deficit in the same period last year was only 5.7 billion reais, the central bank said.

The accumulated main deficit in the 12 months to June amounted to 6.38% of gross domestic product. The Ministry of Economy on Thursday said it expected the primary public sector deficit to be 812.2 billion reais, equal to 11.3% of GDP.

Brazil’s gross debt of 85.5% of GDP in June was higher than the estimate of 83.8% in a Reuters poll of economists, rising towards the government’s year-end forecast of 94.7% of GDP.

Net debt rose to 58.1% of GDP in June, also higher than expected.

The nominal public sector deficit, including interest payments, jumped to 210.2 billion reais in June, the central bank said. In the 12 months to June, total shortages totaled 818.6 billion reais, equivalent to 11.4% of GDP. ($ 1 = 5.18 reais) (Reporting by Marcela Ayres and Jamie McGeever Editing by John Stonestreet and Jonathan Oatis)


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UPDATE sells Euro-2 zone bonds; Italy has set the best month since May | Instant News

* Eurozone periphery government bond yields tmsnrt.rs/2ii2Bqr (Updates throughout)

By Elizabeth Howcroft

LONDON, July 31 (Reuters) – Eurozone government bonds were sold on Friday, both in the core and periphery, with Italian 10-year bonds set as the worst day since early May but still producing strong performance throughout the month.

With the market widely cautious on Friday, analysts said the sell-off could be triggered by an unusual month-end flow.

“I attribute it to long-term, long-term positions from dealers who may be mistaken because of the sale of real cash flow,” said Peter Chatwell, chief of multi-asset strategy at Mizuho.

Analysts were surprised by the move, because the month-end index extension – where funds rebalanced their portfolios to reflect activity during the month – was expected to support bonds at the start of the session.

Italian 10-year yields are at their highest level in more than a week, up 6 basis points (bps) at 1.092% at 1449 GMT.

However, Italian bonds have experienced a decent month, with yields set down 24 bps in July – the best month since May. The paper demand was driven by recovery funds agreed by the European Union last week.

The 750 billion euro fund, which will partly be offered as a grant to the member states hardest hit by the coronavirus, has been hailed as a game changer for the eurozone and has increased Italy’s debt, given concerns about the country’s sustainability. loan.

Italy’s risk premium pays Germany for 10-year debt falling to March lows when the fund was agreed, although it has risen again this week, and is 3 bps wider on Friday at 160.65 bps.

Mizuho Chatwell said the Italian rally that was easing this week could be due to oversupply.

“What happened to BTP was a bit exhausted after recording a number of supplies,” he said.

“I think the market is now saturated with this positivity, but supply continues to run,” he added.

The 10-year German Bund benchmark was set for the best month since April, as investors flocked to safe-haven debt, pushing yields below -0.5%.

Safe-haven bonds are likely to remain supported given the increasing number of coronavirus cases around the world, raising fears of new lockouts.

Global fund managers prefer to cut equities to their lowest level in four years in July while keeping bond allocations unchanged, as hopes for economic recovery fade, a Reuters poll shows.

Data on Thursday revealed a record contraction in Germany – the region’s leading economy – and sent Bund results to two and a half month lows, but there was little reaction on Friday to the euro zone GDP estimates.

But euro zone inflation suddenly rose in July, supporting the European Central Bank’s expectations that negative headline readings could be avoided. (Reporting by Yoruk Bahceli and Elizabeth Howcroft; editing by Gareth Jones and Mark Potter)


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The New Brazilian VAT tax can produce up to 373,000 jobs – the ministry of economy | Instant News

BRAZILIA, July 31 (Reuters) – Formation of a new value-added tax in Brazil by combining the two federal taxes paid by companies can generate up to 373,000 jobs, according to estimates by the ministry of economics.

The new 12% VAT levy, which Minister of Economy Paulo Guedes submitted to Congress last week, will combine the contribution of the ‘PIS’ unemployment insurance and the ‘Cofins’ social security levy currently paid by the company.

This is the first part of a broader government tax reform agenda, which aims to simplify the country’s complex tax system and ultimately reduce the overall tax burden.

According to the Ministry of Economy’s estimate published on Thursday, this could generate between 142,000 and 373,000 jobs, and increase overall productivity by 0.2% to 0.5%, depending on how compliance costs fall.

This could also encourage growth in gross domestic product per capita to 1%, the ministry estimates.

“Reform will bring efficiency gains, because it reduces variations in effective tax rates across sectors,” the ministry said.

“The effect might be greater if we consider the benefits of reducing other economic distortions brought about by taxes, such as the effects on the production chain,” he added. (Reporting by Marcela Ayres Writing by Jamie McGeever Editing by Marguerita Choy)


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Italy’s GDP dropped 12.4% unprecedented in Q2, but better than analysts had feared | Instant News

ROME, July 31 (Reuters) – Italy’s economy shrank 12.4% in the second quarter from the previous three months, preliminary data showed on Friday, due to dipping activity during the coronavirus pandemic, but the decline was less severe than many analysts had predicted.

The quarterly slump in gross domestic product (GDP) in the eurozone’s third-largest economy was “unprecedented”, the ISTAT national statistics bureau said.

On a year-on-year basis, second quarter GDP dropped 17.3%, ISTAT said.

Analysts surveyed by Reuters forecast a 15.0% quarter-on-quarter contraction and an 18.7% year-on-year decline.

All segments of the economy suffer, said ISTAT, without giving details.

ISTAT also revised its reading down for the first three months of 2020 to provide a quarterly decline of 5.4% and a 5.5% decline compared to the same period last year. These were previously given respectively 5.3% and 5.4%.

Italy has been one of the hardest hit countries in Europe by Covid-19, recording more than 35,000 deaths since its transmission was revealed at the end of February. Seeking to stop the spread, the government introduced rigid restrictions on trade and travel on March 9, forcing most businesses to close.

The locking has gradually subsided since May 4 and most of the economy is still sick.

Italy’s official estimate is for a full-year GDP contraction of 8% this year, although Economy Minister Roberto Gualtieri said this might need to be revised lower. The Italian bank expects 9.5% negative growth and the European Commission expects the economy to contract 11.2% – the sharpest decline in the 27-nation bloc.

Spain reported earlier on Friday that its GDP contracted 18.5% in the second quarter from the previous three-month period, while in France GDP fell 13.8% and in Germany it fell 10.1%.

The Italian government has announced measures worth 75 billion euros ($ 89.18 billion) to help companies and families overcome the crisis and said it would present an additional 25 billion euro stimulus package in early August.

ISTAT provides the following details:

Q2 2020 Q1 2020 Q4 2019 T / Q (percent change) -12.4 -5.4r -0.2 Y / Y (percent change) -17.3 -5.5r 0.1

r = revised



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UPDATE 1-Brazil recorded a budget deficit in June as a coronavirus slammed the economy | Instant News

(Adding details)

By Jamie McGeever

BRAZIL, July 30 (Reuters) – The Brazilian government recorded a record budget deficit of 194.7 billion reais ($ 37.6 billion) in June, the Treasury said on Thursday, substantially more than economists had expected, because the corona virus continued reduce tax revenues and trigger spending emergencies.

The main deficit excluding interest payments is more than 160 billion reais of the deficit predicted by economists in a Reuters poll, and taking the deficit does not include interest payments in the first half of this year to 417.2 billion reais.

That compared with the 29.3 billion reais deficit that had accumulated in the first half of last year, the Treasury said.

“It is important to note that the record deficit (in June) stemmed from emergency measures and the effects of the COVID-19 crisis,” Treasury said in the presentation.

Total net income in June for the central government, which consists of the Ministry of Finance, central bank and social security system, was 65.1 billion reais, down 31% in real terms from the same month last year.

Spending reached 259.9 billion reais, up 144% from this year.

The primary deficit accumulated in the 12 months to June was 483.9 billion reais, equivalent to 6.7% of gross domestic product, Treasury said.

The Ministry of Finance reiterates its view that the government’s ‘spending limit’ rule, which limits the growth of non-mandatory public spending at the inflation rate, should not be mocked, because recent media reports have suggested officials consider.

“This is a fundamental instrument for controlling increased spending and ensuring the sustainability of public accounts,” Treasury said.

The current government estimate for this calendar year is a major deficit of 787.4 billion reais, nearly 11.0% of GDP.

Waldery Rodrigues, the ministry’s special secretary, said last week that this would likely be reduced in a new official estimate to be published on Friday.

$ 1 = 5.18 reais Reporting by Jamie McGeever Editing by Chris Reese and Paul Simao


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Italy The June unemployment rate rose to 8.8% due to 46,000 lost jobs -ISTAT | Instant News

ROME, July 30 (Reuters) – Italy’s unemployment rate rose to 8.8% in June from an upwardly revised 8.3% the previous month, data showed on Thursday, as around 46,000 jobs were lost in the ongoing coronavirus crisis, the statistics bureau national ISTAT report.

The May rate was previously reported as 7.8% and ISTAT said health emergencies prove an obstacle to collecting data. A survey of nine Reuters analysts predicted the June unemployment rate of 8.6%.

June is the fourth month of employment data to reflect the impact of the Italian corona virus outbreak that emerged in late February.

“Since February 2020, employment rates have fallen by around 600,000 and job seekers have fallen by 160,000, while the number of inactive people has increased by more than 700,000,” ISTAT said.

Government locking measures aimed at controlling infection put the economy on its knees, with most companies closed throughout March and April.

The unemployment rate fell in the two months because people stopped looking for work, reaching a multi-year low of 6.6% in April. The next increase in May and June reflects the end of the gradual closure that allowed Italians to return to the labor market.

Only people who are actively looking for work are calculated against the unemployment rate.

Seeking to prop up the labor market, the government has banned companies from firing people until mid-August and has supported a temporary layoff scheme to help companies overcome the crisis.

However, in the April-June period, 459,000 jobs were lost compared to the previous three months, ISTAT said.

In June, the youth unemployment rate, which measures job seekers aged between 15 and 24 years, rose to 27.6% from a revised 25.6% in May. The previous month’s figure was given as 23.5%.

Italy’s overall employment rate, one of the lowest in the euro zone, slipped in June to 57.5% from 57.6% in May.

The government has promised more than 75 billion euros in financial support for companies and families, and Economy Minister Roberto Gualtieri has repeatedly said that “no one should lose their jobs because of the corona virus”.

In the first quarter of this year, gross domestic product dropped 5.3% due to a virus outbreak, the steepest quarterly decline since the current series began in 1995.

The second quarter, which contains more days affected by the lockdown, is expected to send a steeper decline, with data coming out on Friday. Economists predict a partial rebound during the second half of 2020.

ISTAT provides the following data:

JUNE MAY APRIL MARCH EMPLOYMENT LEVELS 8.8 8.3r 6.8r 8.4r = YOUTH UNEMPLOYMENT LEVEL (15-24) 27.6 25.6r 23.6r 27.4r EMPLOYMENT LEVELS (15-64) 57.5 57.6 57.9 r = revised (Reporting by Crispian Balers)


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UPDATE 1-Brazil to focus on income, payroll taxes in the next tax reform phase | Instant News

(Adding details, quotes)

By Marcela Ayres and Jamie McGeever

BRAZILIA, July 29 (Reuters) – Brazilian Economy Minister Paulo Guedes said on Wednesday that he was very optimistic to push for extensive tax reform, with the next stage centering on income and payroll taxes after the value added tax proposal earlier this month.

Speaking to reporters in Brasilia, Guedes stressed there would be no tax rises and that the country’s overall tax burden would not increase, adding that expanding the tax base could help reduce income taxes and eliminate some others altogether.

“We are very confident in this broad reform. The first stage is VAT, and selective taxes, income taxes, and payroll taxes will follow. We are very pleased with the first step we took, “he told reporters in Brasilia.

Simplifying the complex Brazilian tax system and ultimately lowering taxes is one of the main boards of the Guedes economic agenda. This will help increase investment, spending, employment and economic growth, he said.

Brazil’s overall tax burden is around 33% of gross domestic product, one of the highest among developing countries, and is leaning towards indirect and regressive taxes. Guedes previously said he wanted to reduce it to 20% of GDP over the next 15 years.

The government is under increasing pressure to increase revenues to help cover the budget deficit, which has exploded to record levels due to the COVID-19 crisis. But Guedes insisted there would be no increase in taxes.

“We will not raise taxes. If you make a broader base, and a little tax here, you can reduce income tax, reduce seven, eight, nine, ten taxes, eliminate some (the rest), “Guedes said.

Officials have indicated that they are considering implementing some form of transaction tax, along the removed and unpopular ‘CPMF’ tax line, to fund payroll tax deductions or exemptions.

Earlier this month, Guedes sent the first part of the government’s tax reform proposal to congressional leaders, combining the two federal consumption taxes into a single value-added tax of 12%. (Reporting by Marcela Ayres Writing by Jamie McGeever Editing by Chris Reese and Aurora Ellis)


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Brazilian employment figures suggest a V-shaped economic recovery is possible – Bianco from the Ministry of Economy | Instant News

BRAZILIA, 28 July (Reuters) – Brazil’s formal employment figures for June show the labor market is recovering from the depths of the COVID-19 crisis and that a “V-shaped” economic recovery is very likely, Employment and Pension Secretary Bruno Bianco said on Tuesday.

Bianco spoke in an online presentation after Ministry of Economy figures showed the economy shed 11,000 formal jobs in June, by far the smallest decline in employment since the beginning of the crisis earlier this year.

Reporting by Marcela Ayres and Jamie McGeever Editing by Chris Reese


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Brazilian unemployment is likely to be higher than the statistics show, official officials told Folha | Instant News

RIO DE JANEIRO, July 27 (Reuters) – The increase in unemployment in Brazil does not reflect the real reality, because people who lose their jobs cannot register because of coronavirus actions, a senior Ministry of Economy official told a newspaper in an interview published in Monday.

Speaking with Folha de S. Paulo, Secretary of Economic Policy Adolfo Sachsida said the methodology used by the IBGE statistics body to measure unemployment was inaccurate, which probably meant it counted the number of people who lost their jobs.

“Unemployment has increased, the data does not show this, to be honest,” Folha quoted Sachsida as saying. “We must be prepared to tackle this problem that will hit the Brazilian people hard. In September, the unemployment rate will jump a lot. ”

Brazil’s unemployment rate in the three months to May reached a two-year high of 12.9%. Official figures for June, due later this week, are expected to show that they have risen further. (Reporting by Gabriel Stargardter; Editing by Steve Orlofsky)


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The German Bund Safe-haven is supported by US / Chinese tensions | Instant News

* Eurozone periphery government bond yields tmsnrt.rs/2ii2Bqr

By Dhara Ranasinghe

LONDON, July 27 (Reuters) – The benchmark 10-year German bond yield slumped Monday as a sign that jitters in world markets over rising US / China tensions pushed investors into safe haven assets.

China took over the place of the US consulate in the southwestern city of Chengdu on Monday, after ordering the facility to be vacated in retaliation for last week’s dismissal from its consulate in Houston, Texas.

Worsening relations between the two biggest economies in the world pushed safe havens such as gold and government bonds, allowing German debt to recover from price losses on Friday triggered by stronger-than-expected purchasing manager data (PMI).

Yields on German 10-year bonds were last down about 1.5 basis points at -0.456%, after rising 4 bps on Friday.

“Risk assets are struggling … while for the Bunds the textbook reaction to the PMI combined with another failed test of the -0.50% level leaves 10-year results in the middle of the range,” said Commerzbank pricing strategist Michael Leister.

Italian bond yields are slightly lower, with sentiment towards the periphery supported by increasing confidence that aggressive fiscal and monetary stimulus in the euro area will help dampen its economy from coronavirus attacks.

Yields on Italian 10-year bonds dipped to 1.06%, holding close to the lowest level of 4-1 / 2 months last week. The gap over the 10-year benchmark German Bund yields briefly narrowed to around 148 bps, the most stringent in five months.

European Union leaders last week reached an agreement on a 750 billion euro ($ 878 billion) COVID-19 recovery fund, agreeing to raise billions of euros on the capital market on behalf of all 27 countries, in an act of unprecedented solidarity.

“We think that (the spread of Italian / German bond yields) can tighten 15-20 bps from here, the amount becomes less important than the direction,” said Jorge Garayo, senior level strategist at Societe Generale. “This recovery fund is important because it marks a very important step towards something that was previously taboo – fiscal transfers.”

$ 1 = 0.8542 euros Reporting by Dhara Ranasinghe Editing by David Holmes


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