Brazil’s finances are set to deteriorate substantially next year, leaving the government with few options to revive a sputtering economy and raising the threat of a credit downgrade.
The government is likely to miss its key 2014 budget target, the primary surplus, by as much as 50 billion reais ($22 billion), delivering only about half its goal, estimates by Reuters and private economists show.
Unlike most other countries, Brazil’s most-watched budget goal strips out interest payments on its debt, meaning its overall deficit would widen if the primary surplus dwindles.
Such an event could deal a major setback to Latin America’s biggest economy, which won its investment-grade credit rating in 2008 through a commitment to fiscal responsibility and strong economic growth.
Growth, however, has slowed sharply since 2011, and President Dilma Rousseff has unleashed costly tax breaks and credit subsidies in response.
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