Brazil's current account balance improving, at least in dollar terms

Brazil's trade balance improved significantly to USD4527.5mn due to another sharp contraction in imports in June. As a result, the H1 trade balance in improved to USD2.2bn. 

The June trade balance also indicates that the current account deficit declined to -USD2238m in the same month and that it improved to -USD38.1bn in H1 15. 

"Clearly, growth weakness at home is helping on the external front although export growth remains under pressure. Assuming the current account shows a similar improvement in H2 as well, we are heading for a nearly 28% correction in the current account this year in dollar terms", says Societe Generale. 

However, given the possibility that the BRL depreciation this year could average closer to 30% , it is likely to see a very slight improvement in the current account balance. 

Moreover, such a steep pace of decline in imports also indicates serious deterioration of investment demand back home. As a result, a sustained improvement in the current account balance must be associated with improvements in exports. 

"It remains to be seen if the BRL depreciation over the past year is sufficient to boost competitiveness and growth of Brazilian exports", added Societe Generale.