UPDATE 2-Brazil’s Nov primary budget surplus slumps

* Primary surplus falls sharply from year earlier

* Nominal deficit widens to 14.4 bln reais

* Despite decline, Nov primary surplus tops estimates
(Recasts, adds details, projections, byline)

By Raymond Colitt and Elzio Barreto

BRASILIA, Dec 29 (BestGrowthStock) – Brazil’s primary budget
surplus fell sharply in November from a year earlier, the
central bank said on Wednesday, building pressure for incoming
President Dilma Rousseff to adopt unpopular spending cuts.

The consolidated primary surplus (BRPSPS=ECI: ) slumped to
4.2 billion reais ($2.5 billion) from 12.3 billion reais a year
earlier, the central bank said.

Brazil’s government maintained a high level of spending in
the run-up to October’s presidential election, helping fuel
inflationary pressure and expectations for an interest rate
hike.

Finance Minister Guido Mantega said on Tuesday that Brazil
could miss its 2010 budget targets due to overspending by state
and city governments. For more, see: [ID:nN28248062].

The primary surplus was equivalent to 2.51 percent of gross
domestic product in the 12 months through November, below a
government goal of 3.1 percent of GDP for the year.

Analysts closely watch the primary budget result as a gauge
of the country’s debt service capacity.

Despite the year-on-year decline, the surplus was higher
than the 3.65 billion reais median forecast of 10 analysts
surveyed by Reuters. The estimates ranged from a deficit of 3
billion reais to a surplus of 6.5 billion reais.

Brazil’s nominal budget result, which includes debt
payments, was equal to a deficit of 14.4 billion reais
(BRPSPS=ECI: ) in November, nearly five times larger than the 3
billion reais deficit a year earlier.

Experts say tax revenue growth this year has trailed the
country’s economic expansion of around 7.5 percent.

Authorities hope that strong retail sales during the
December holiday season boost tax revenue and improve year-end
figures.

The central bank expects the nominal budget deficit to
narrow marginally to 2.3 percent of GDP in December, from 2.5
percent in November.

Still, the incoming Rousseff administration is likely to
have to cut more than 20 billion reais from a bloated budget
Congress approved earlier this month [ID:nN22114943].

Brazil’s net debt remained unchanged in November at 40.1
percent of GDP. With firm economic growth next year, the
central bank expects that ratio to fall to 37.8 percent by the
end of 2011.

For the central bank report see:
http://www.bcb.gov.br/?ECOIMPOLFISC
($1=1.688 reais)
(Additional reporting by Leonardo Goy; editing by Jeffrey
Benkoe and Dan Grebler)

UPDATE 2-Brazil’s Nov primary budget surplus slumps