More government action needed to meet looser Brazil fiscal goals: Reuters Poll

SAO PAULO (Reuters) - Brazil must raise taxes and sell assets to meet fiscal targets even after loosening its goals, a Reuters poll showed on Wednesday, highlighting the government's struggle to maintain its commitment to austerity.

Nineteen of 22 economists expect additional fiscal measures by the end of the year, following a cost-cutting package put forward on Tuesday alongside the revised targets.

"Although the measures announced yesterday are pointed in the right direction, they are clearly insufficient," said André Duarte, an economist at Rio de Janeiro-based asset manager Truxt Investimentos.

The government loosened its annual budget targets on Tuesday through 2020, signaling seven straight years of budget deficits starting in 2014.

Brazil's slower-than-expected economic recovery has led tax revenues to undershoot government forecasts, forcing policymakers to repeatedly slash spending.

Unpopular center-right President Michel Temer has also been grappling with lawmakers unwilling to back new taxes or belt-tightening measures as the 2018 legislative and presidential elections fast approach.

The situation has raised flags for investors seeking clear indications of austerity, given that most of the measures announced by Finance Minister Henrique Meirelles and Planning Minister Dyogo Oliveira on Tuesday require approval in Congress.

Only two economists saw the government turning to lawmakers for a major tax hike. Instead, 15 expected the government to raise minor tariffs that can be tweaked by decree.

Ten economists said officials would announce new asset sales and privatizations, extending efforts to raise one-time revenues and bolster investment in Brazil's aging infrastructure. Six expected additional government spending cuts.

"The government's economic team knows it should focus on spending cuts and complement them with actions affecting revenues," said Itaú Unibanco economist Pedro Schneider. "But this adjustment needs to go through Congress, so one has to consider what is likely to be approved or rejected."

Itaú is the top forecaster of Brazil's primary budget results in Reuters polls.

Temer's fiscal efforts are likely to bear fruit, with 16 economists forecasting that Brazil will meet the 2017 and 2018 budget targets.

That could help it avoid a credit downgrade, 16 of the economists said. Brazil lost its investment-grade credit rating in 2015, after Temer's leftist predecessor Dilma Rousseff repeatedly missed budget targets.

Standard & Poor's on Tuesday reaffirmed Brazil's "BB" rating, dismissing the possibility of a short-term downgrade. An analyst at Moody's Investors Service said on Wednesday looser budget targets do not affect its perception of the country.

(Reporting by Bruno Federowski; Editing by Brad Haynes and Lisa Shumaker)