UPDATE 2-Brazil's 2008 primary budget beats target

Wed Jan 28, 2009 4:09pm EST
(Recasts; adds byline, quote, details throughout)
By Ana Nicolaci da Costa and Isabel Versiani
BRASILIA, Jan 28 (Reuters) - Brazil's primary budget surplus surpassed its target in 2008 but analysts fear easing government tax revenues could put public accounts under pressure.
Robust growth and ample tax revenue allowed Brazil to post a primary budget surplus of 4.07 percent of gross domestic product in 2008, above the government target for 3.8 percent.
The result, along with solid growth and a strengthening U.S. dollar also helped reduce the country's public sector debt to 36 percent of gross domestic product last year from 42 percent in 2007, the central bank said on Wednesday.
Investors monitor the primary budget surplus, which excludes interest payments, as a gauge of a country's ability to service its debt.
But analysts said there are already signs that tax revenues are falling as a global crisis hurts economic growth and some fear a squeeze in tax collection could jeopardize Brazil's recent primary budget surplus record.
"For 2009, the sharp contraction of revenues (expected) should lead the primary surplus to head to the lower limits of the fiscal targets," said Alexandre Lintz, chief strategist at BNP Paribas in a note.
He said he expected primary surplus to reach 3.3 percent of GDP in 2009. The government has a primary budget surplus target of 3.8 percent for 2009 but offers some leeway for projects considered of key economic interest for the country.
According to the latest weekly central bank survey, Brazil's economy is expected to slow to 2 percent in 2009, far below the more than 5 percent growth this year.
Still, Brazil holds more than $200 billion in foreign exchange reserves, and a rapid strengthening of the U.S. currency against Brazil's real has made it easier for the country to finance its debt, parts of which are held in U.S. currency.