Brazil's Finance Minister Joaquim Levy arrives at the Finance Ministry in Brasilia, Brazil, December 18, 2015. REUTERS/Ueslei Marcelino
Brazil’s Finance Minister Joaquim Levy arrives at the Finance Ministry in Brasilia, Brazil, December 18, 2015. REUTERS/Ueslei Marcelino

The Secretariat of Economic Policy (SPE) of the Ministry of Finance shall publish the Bulletin – Fiscal Structural result, which aims to contribute to the monitoring of fiscal policy. The indicator represents the savings generated by the discretionary effort and recurrent public sector, which contributes to the long-term solvency of the Brazilian state.

Thus, the SPE follows an international trend and presents a methodology in which the structural fiscal result can be defined as one consistent with the trend GDP, with asset prices (oil) the level of long-term equilibrium and free events effects sporadic affecting the primary outcome.

 The Secretary for Economic Policy, Manuel Pires, said on Monday (9/5) that the Ministry of Finance will publish later this week a decree to bring the rules for the dissemination of the structural primary balance of the country.

“Every year the SPE will update tax data and publish them. The disclosure will occur within 45 days after the disclosure of annual GDP by IBGE, “Pires said.

As explained by the secretary, it is normal that government revenues will increase in years of economic expansion and decrease when the economy shrinks. The structural primary balance is a calculation that smoothes these effects of the economic cycle on tax indicators.

“By removing the effect of the cycle, there is greater clarity on how fiscal policy is contractionary or expansionary and how is the tax situation of the country in a longer-term view,” Pires said. The MF he added, thus intends to add to the discussion a little more uniform by means of a transparent and reproducible methodology.

SPE figures showed that while conventional results, released by the Central Bank, was a deficit of the consolidated public sector 1.88% of GDP in 2015, the structural deficit was lower, 0.90% of GDP. It was the first year since 2009 in which the structural result was lower than the conventional.

In 2014, the structural fiscal balance had been negative at 2.02% of GDP. This means that the difference between 2014 and 2015, the fiscal impulse was contractionary at 1.1% of GDP. As GDP also fell last year, the number indicates that the fiscal policy was pro-cyclical, ie, fiscal performance has contributed to this decline.

Pires noted that the fiscal adjustment that was made in 2015, focused on reducing investment amid the rigidity of expenditure was necessary, but is not sustainable in the long run. “This strategy of 2015 is unplayable over the years,” Pires said. “It is important to leave this type of adjustment to something more structured so as to reduce the growth rate of spending more permanently.”