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Brazil’s latest government data indicates that the April Current Account registered at -1.68 billion US dollars, significantly lower than the forecast of -0.25 billion.
The devastating economic impact of the Coronavirus pandemic has hit the Brazilian economy hard, and April’s Current Account (CA) is just the latest statistic to reflect this. Brazil, which is Latin America’s largest economy, saw its annual CA dip by -5.1 billion US dollars over March. Furthermore, this worse than expected bearish performance marks the worst monthly CA since March of last year.
Much of this can be attributed to a decline in exports to foreign markets during the early stages of the pandemic. Business activity across the country has ground to a halt while the world scrambles to contain the virus, resulting in a significant downturn of Brazil’s foreign trade. As a result, the country’s net service revenues, which comprise much of the CA, fell by -2.2 billion US dollars during April.
Analysts and economists alike have pointed to the need for more fiscal and monetary stimulus measures in order to address the decline in economic activity and support the Brazil’s recovery. The government, however, is constrained by limited resources, especially since much of the stimulus measures deployed prior to the pandemic has already pushed unemployment levels up and increased the government’s debt burden.
The central bank has responded by cutting the interest rate by 1.5% during this month instead of the 3% initially expected. However, this may not be enough to contain the economic fallout of the coronavirus. Brazil is likely to experience further downward pressure on the CA in the coming months as global economic activities remain mired in the grips of the pandemic.
