Brazil's government widens 2026 primary deficit forecast
EWZ•Brazil's government raised its 2026 primary deficit forecast to 80.9 billion reais, or 0.59% of GDP, from 52 billion reais projected in July. It said it would need to freeze 13.6 billion reais in spending and block 2.4 billion reais in expenditures to comply with fiscal rules.
1. Deficit forecast rises
The government raised its primary deficit forecast to 80.9 billion reais ($15.61 billion) from 52 billion reais in July, a shortfall equivalent to 0.59% of GDP. It attributed the deterioration to a 22.1 billion-real increase in projected spending and a 15.7 billion-real decline in expected revenue.
2. Spending and fiscal target
The government estimates primary spending will reach 19.55% of GDP, the highest level of President Luiz Inacio Lula da Silva's current term, which began in 2023. The year's fiscal target is a primary surplus of 0.25% of GDP, with a tolerance band of 0.25 percentage point. Under its methodology for assessing compliance, the government projected a deficit of 0.1% of GDP, versus a previously forecast surplus of 0.08%.
3. Spending measures
The government said it would need to freeze 13.6 billion reais in spending and block 2.4 billion reais in expenditures to comply with fiscal rules. Rising spending has been a focus of fiscal concerns surrounding Lula's administration as he seeks re-election in October.
