Brazil’s current account improving in dollar terms, but not as percentage of GDP

Brazil's trade balance in May was the strongest since August 2012 as imports fell over 30% yoy due to weakness in domestic demand. 

The year-to-date trade balance, therefore, improved from -USD4,863m to -USD2,305m. According to Societe Generale, the current account balance (CAB) is likely to improve further to -USD6074m in May raising year-to-date CAB at -USD38.5bn as against 2014 CAB of -USD44.9bn during the same months. It's likely that the CAB will continue to improve through the year in dollar terms, adds SocGen.

Further, Societe Generale says, the above expectation might not occurs due to the following reason 

• Firstly, the recent revisions to the current account series based on the new methodology puts the 2014 current account deficit at a larger -4.4% of GDP compared with the original deficit of -3.9%. 
  
  
• Secondly, the bulk of the recent correction (in dollar terms) has come from a decline in outflows related to dividend payments. 
  
  
• Thirdly, with the exception of May, the contraction in imports has not helped trade balance much as nominal exports continue to fall. It also indicates that the heavy BRL depreciation has failed to lift nominal exports (although real exports have risen). 
  
  
• Finally, the BRL depreciation and the resulting lower nominal dollar GDP also implies a higher current account deficit to GDP ratio. If the current account to GDP ratio improves at all this year despite the counter-cyclical improvement shown in dollar terms, will give a surprise.