Brazil's July Current Account Deficit Hits Seven-Year High

Brazil's current account deficit widened significantly in July, reaching its largest shortfall for the month in seven years, according to central bank data released on Thursday.

The deficit came in at $8.11 billion, well above the $6.6 billion that economists had predicted. This marks the biggest gap for the month of July since 2019.

The deterioration was broad-based. The services deficit grew by roughly $500 million compared to the same month last year, while the factor payments account deficit increased by about $400 million. At the same time, Brazil's trade surplus narrowed by around $200 million, as imports grew at a faster pace than exports.

A widening current account deficit can put downward pressure on a currency, as it signals a net outflow of dollars from the economy.

Foreign direct investment (FDI) into Brazil totaled $7.46 billion in July. This was below the $7.92 billion median forecast and also lower than the $8.4 billion recorded a year earlier.

On a rolling 12-month basis, FDI eased to 3.50% of gross domestic product (GDP). Despite the decline, it continued to comfortably cover the current account deficit, which widened to 2.49% of GDP over the same period.