Brazil Records Worst Deficit İn Nearly 2 Decades

The government registered a primary deficit of $470 million (1.6 billion real) in the first half of 2015, according to figures from the National Treasury on Thursday, O Globo newspaper reported.



The deficit is the worst result since 1997. In the same period last year, the government recorded a surplus of $5 billion (17 billion real).



"The deficit comes from the drop in federal revenues and the fact that budget cuts are still waiting to be approved," said Rodrigo Zeidan, associate professor of economics and finance at Brazil's Fundação Dom Cabral business school.



Last week, the government's economic team reduced its primary surplus budget target for the year from 1.2 percent of GDP to 0.15 percent of GDP.



The change was met with a negative reaction from the markets and saw the currency plunge to a 12-year low to $3.34 against the dollar.



The move also prompted ratings agency Standard & Poor's to threaten to downgrade Brazil's investment-grade rating.



Brazil's current economic woes are compounded by the end of the commodity boom and a huge corruption scandal at the state-run oil giant Petrobras.  



After nearly 12 years of positive growth - including a peak of 7.5 percent GDP in 2010 - the economy is expected to shrink by least 1 percent this year with mixed opinions on whether it will return to growth in 2016, when Brazil will host the 2016 Olympic and Paralympic Games. - Sao Paulo