Brazil posts wider-than-expected current account gap in June, FDI disappoints

BRASILIA, July 25 (Reuters) - Brazil posted a larger-than-expected current account deficit in June, central bank data showed on Friday, while foreign direct investment (FDI) also came in below forecasts.

The current account gap reached $5.13 billion in the month, exceeding the $4.36 billion median estimate in a Reuters poll of economists.

The shortfall also widened from $3.37 billion in June 2024, driven by a higher deficit in the factor payments account, which rose to $6.20 billion from $4.94 billion a year earlier.

The deterioration in factor payments was mainly due to increased profit and dividend outflows linked to direct and portfolio investments, which jumped 45.6% year-on-year to $3.82 billion.

Meanwhile, FDI totaled $2.81 billion in June, well below the $4.5 billion forecast and the $6.27 billion recorded a year earlier.

Over the 12 months through June, the current account deficit widened to 3.42% of gross domestic product (GDP), more than double the 1.28% seen a year earlier.

The worsening was largely attributed to a shrinking trade surplus, as imports outpaced exports amid resilient economic activity.

FDI in the 12-month period rose to 3.14% of GDP from 2.87% a year earlier, but was no longer sufficient to fully finance the current account gap, signaling a less favorable outlook for Brazil's external accounts.

FDI is considered a high-quality, long-term source of funding, typically directed toward productive business activities.