Brazil's July current account deficit widens to 7-year high, exceeding forecasts

Key facts

• Brazil's current account deficit was $8.11 billion in July.
• This is the largest deficit for the month since 2019.
• The services deficit and factor payments deficit both increased.
• Brazil's trade surplus shrank as imports grew faster than exports.
• Foreign direct investment in July was $7.46 billion.

Brazil's current account deficit widened significantly in July, reaching $8.11 billion, which is the largest shortfall for the month in seven years and exceeded economists' forecasts of $6.6 billion. This deterioration in external accounts was driven by an increase in the services deficit by approximately $500 million and the factor payments account deficit by roughly $400 million compared to the previous year.

Furthermore, Brazil's trade surplus contracted by about $200 million year-over-year, as imports grew at a faster pace than exports. A widening current account deficit can exert downward pressure on a country's currency due to a net outflow of U.S. dollars.

Foreign direct investment (FDI) in July totaled $7.46 billion, falling short of the $7.92 billion median forecast and the $8.4 billion recorded a year earlier. On a rolling 12-month basis, FDI eased to 3.50% of gross domestic product but continued to sufficiently finance the current account deficit, which widened to 2.49% of GDP.