Brazil's May current account deficit smaller than expected, but up from last year

BRASILIA, June 25 (Reuters) - Brazil posted a narrower-than-expected current account deficit in May, though the gap widened from a year earlier as a shrinking trade surplus continued to weigh on the external balance.

The country recorded a $2.93 billion current account deficit last month, central bank data showed on Wednesday, below the $3.1 billion shortfall forecast in a Reuters poll. In May 2024, the deficit stood at $2.52 billion.

Foreign direct investment (FDI) totaled $3.66 billion in May, falling short of the $4.5 billion expected by economists.

Over the 12 months through May, the current account deficit rose to 3.26% of gross domestic product (GDP), a sharp deterioration from 1.30% reported in the same period a year earlier.

Still, the gap remained covered by FDI, which edged up to 3.31% of GDP.

According to the central bank, the trade surplus narrowed by $881 million in May from a year earlier, extending a trend seen in recent months as imports growth outpaced exports amid stronger domestic demand.

On the other hand, the central bank noted improvements in other components of the current account, as the factor payments deficit narrowed by $139 million and the services deficit fell by $57 million.

Meanwhile, the secondary income account, comprising unilateral transfers to residents in the country, saw its surplus increase by $273 million in May.