Brazil posts $3.4 billion current account deficit in May

FILE PHOTO: A drone view shows the Central Bank headquarters building during sunset in Brasilia, Brazil, June 11, 2024. REUTERS/Adriano Machado/File Photo

BRASILIA (Reuters) - Brazil posted a current account deficit of $3.4 billion in May, the central bank said on Monday, reversing the surplus recorded a year earlier due to a smaller trade surplus and a larger deficit in the services account.

The result was slightly narrower than the $3.5 billion deficit forecast in a Reuters poll of economists. In May last year, Latin America's largest economy had registered a $1.1 billion surplus in its current account transactions.

Foreign direct investment reached $3 billion in May, lower than the $4.75 billion projected in the poll.

The 12-month current account deficit rose to 1.79% of gross domestic product but was still comfortably covered by FDI, which was 2.95% of GDP.

The trade balance fell by $3 billion and the services deficit increased by $1.3 billion compared to the same month last year, the central bank said.

Trade exchanges between Brazil and abroad have been affected by the growing import of crypto assets, which rose 55% in May to $1.5 billion. These figures are included in the central bank's statistics - though not in the government's trade figures - and reduce the country's trade surplus.

The deficit in the factor payments account rose by $168 million compared to May 2023, the central bank added.

Portfolio investments in the domestic market saw a $1.3 billion inflow in the month, comprised of a $2.2 billion inflow in bonds and a $896 million outflow in stocks and investment funds.

(Reporting by Marcela Ayres; Editing by Gabriel Araujo and Christina Fincher)