(Adds analyst comments, context)
By Marcela Ayres
BRASILIA, April 7 The Brazilian government on
Friday widened its 2018 fiscal deficit target to 129 billion
reais (about $41 billion) from 79 billion reais, highlighting
the challenges President Michel Temer faces in rebalancing the
country's depleted public accounts.
Two years of deep recession have dragged down tax revenues
and eroded government finances to the point that Brazil lost its
coveted investment-grade sovereign debt rating.
A member of the economic team told Reuters this week the
deficit goal could be widened given the slow pace of recovery.
Temer has promised to gradually reduce that deficit by
rolling back tax breaks, trimming public spending and
overhauling the country's costly pension system.
For 2019 and 2020 the government forecasts primary deficits
of 65 billion reais and 10 billion reais respectively.
Market reaction was muted, with the real slightly
weaker and the benchmark Bovespa stock index remaining
"Is a more realistic target ... it shows a very gradual
improvement of the (fiscal) trajectory," said Alessandra
Ribeiro, partner with Sao Paulo-based consultancy Tendencias.
Ribeiro said the wider target puts more pressure on
lawmakers to approve and keep a proposed pension reform
"If the reform is completely disfigured then the risk about
the sustainability of the fiscal accounts will come back to the
fore," Ribeiro said.
Temer is facing resistance to approve a reform to limit
generous pension benefits in order to close the yawning fiscal
deficit. For next year the government sees a pension deficit of
202 billion reais.
The market is forecasting a deficit of 118.3 billion reais
next year, according to estimates collected by the finance
Temer canceled payroll tax breaks for 50 sectors and froze
42 billion reais in budget spending as part of efforts to meet
this year's deficit goal of 139 billion reais.
($1 = 3.1425 Brazilian reais)
(Additional reporting by Silvio Cascione; Writing by Alonso
Soto; Editing by James Dalgleish)