Brazil's largest financial institutions have sharply reduced their forecasts for 2027, confronting reelected President Luiz Inácio Lula da Silva with a weaker economy just as he prepares a new fiscal programme. Their estimates now imply growth far below the government's August budget assumption of 2.46 per cent.
Bradesco lowered its projection from one per cent to 0.4 per cent, while XP cut its estimate to 0.3 per cent. Itaú and BTG Pactual had already moved to 0.5 and 0.6 per cent. That range would be Brazil's weakest performance since 2016, excluding the pandemic year.
All four institutions expect interest rates to remain high because inflation risks have worsened. The central bank halted its easing cycle and held the Selic rate at 13.75 per cent, tightening credit, discouraging investment and increasing the government's own debt-service burden.
The slowdown matters directly for revenue. Brazil's Treasury estimates that every percentage-point shortfall in GDP growth removes 16.6 billion reais from federal tax receipts. Gross debt already stands near 83 per cent of GDP, or 95.2 per cent under the International Monetary Fund's methodology.
Lula's administration had forecast an effective primary surplus of 18.6 billion reais in 2027, equal to 0.13 per cent of GDP. That projection preceded campaign promises to enlarge Bolsa Família, make direct payments to micro-entrepreneurs and expand benefits for students.
Each bank now expects a primary deficit between 0.1 and 0.6 per cent. The Finance Ministry is reviewing its assumptions before releasing an update later this month. BTG says the outcome will depend on Lula's economic team and whether the fiscal response restores confidence or deepens the slowdown.
The political choice is therefore narrower than campaign rhetoric suggested. Spending cuts could weaken promised programmes, while tax measures may disappoint if growth collapses. Lula must show how commitments can be financed under slower activity, otherwise higher risk premiums will reinforce the very stagnation undermining revenue.
