Brazil widens 2026 primary deficit forecast to $15.61 billion

Investing.com -- Brazil's government expanded its primary deficit projection for 2026 to 80.9 billion reais ($15.61 billion) on Thursday, up from the 52 billion reais estimate made in July. The revised shortfall represents 0.59% of gross domestic product.

The broader deficit stems from a 22.1 billion-real rise in anticipated spending combined with a 15.7 billion-real drop in total revenue expectations.

The government now expects primary spending to reach 19.55% of GDP by year-end, marking the highest level during President Luiz Inacio Lula da Silva's current term, which started in 2023.

Growing expenditures remain central to fiscal worries about Lula's administration as the leftist president pursues re-election in October.

Investor doubts about Brazil's capacity to achieve fiscal balance have pushed up risk premiums, leading to a sharp rise in the gross debt-to-GDP ratio.

The official fiscal target for 2026 stands at a primary surplus of 0.25% of GDP, with a tolerance band of 0.25 percentage point. The government can exclude certain expenditures when measuring compliance.

Under that calculation method, the government projected a primary deficit of 0.1% of GDP, compared with a surplus forecast of 0.08% of GDP in its previous revenue and expenditure report.

The government said it would need to freeze 13.6 billion reais in spending and block 2.4 billion reais in expenditures to meet fiscal rules.

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