(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)