By Marcela Ayres
BRASILIA, June 29 (Reuters) - Brazil's government expects total spending as a share of gross domestic product to decelerate and end the year at around 19%, Treasury Secretary Daniel Leal said on Monday.
Treasury data released earlier in the day showed the indicator rising steadily since mid-last year, reaching 19.6% of GDP in the 12 months through May.
The trend comes as economists voice concern over government stimulus measures — including off-primary-budget financial policies — rolled
out by President Luiz Inacio Lula da Silva as he approaches an October re-election bid.
The measures come as the central bank is relying on slower economic activity to bring inflation under control.
"The trend for the second half is for total spending as a percentage of GDP to decline and return to around 19%, perhaps slightly below," Leal said.
He argued that fiscal policy has been reducing stimulus in recent years, delivering weaker primary results than in earlier periods.
"I understand there are concerns among several economists regarding fiscal stimulus, but it is difficult to say that this alone explains interest rates," he added, citing other "peculiarities of the Brazilian economy" without elaborating.
FISCAL DATA
Brazil's central government posted a 26.3% rise in its primary deficit in May from a year earlier, driven by higher spending, particularly on pensions.
The monthly shortfall reached 53.257 billion reais ($10.31 billion), broadly in line with the 53 billion reais deficit forecast by economists in a Reuters poll.
In the 12 months through May, the deficit totaled 142.3 billion reais, equivalent to 1.06% of gross domestic product, versus a government target for a 0.25% primary surplus this year, with a tolerance band of plus or minus 0.25 percentage points of GDP.
According to the Treasury, the result reflected a real 9.4% increase in total spending, outpacing a 5.5% rise in net revenue, which has been supported by strong tax revenue, with record monthly collections in all months this year.
The government said the main driver of spending growth was higher pension outlays, which Treasury Secretary Leal attributed to efforts to reduce the backlog of beneficiaries, as well as a calendar effect.
This year, court-ordered pension payments were made in the first half, whereas in 2025 they were disbursed in the second half.
Leal said the government does not expect pension benefits to continue expanding at the pace seen so far this year.
($1 = 5.1663 reais)
(Reporting by Marcela Ayres; Editing by Kevin Liffey, Paul Simao and Sharon Singleton)
