Brazil's current account gap no longer fully covered by FDI

BRASILIA, April 28 (Reuters) - Brazil's current account deficit over the past 12 months is no longer fully covered by foreign direct investment (FDI), despite a better-than-expected performance in March, central bank data showed on Monday.

The figures point to a less favorable outlook for Brazil's external accounts, as FDI - seen as a high-quality, long-term source of financing for current account deficits - consists largely of investments in companies' productive activities.

Brazil posted a current account deficit of $2.245 billion in March, narrower than the $2.95 billion gap forecast by economists polled by Reuters.

Meanwhile, FDI inflows totaled $5.99 billion in March, below the $8.529 billion expected.

As a result, the 12-month current account deficit edged down slightly to 3.21% of gross domestic product (GDP) from 3.28% in February. FDI inflows covering the gap deteriorated to 3.19% of GDP in the 12-month period, down from 3.38% the previous month.

The central bank had already flagged last month that such a shift could occur soon.

Breaking a recent trend, Brazil's trade surplus in March rose by $1.3 billion compared to a year earlier, driven by higher exports while imports remained largely stable.

In previous months, a shrinking trade surplus had been the main drag on the current account, as stronger import growth outpaced exports amid robust economic activity in Latin America's largest economy.

Also helping March's overall external account performance, Brazil's deficit in the factor payments account narrowed by $895 million from a year earlier.

On the downside, the services deficit widened by $460 million, the central bank said.