The next government begins in January 2027 with a tighter fiscal outlook than in 2023. Official data, market projections, and analyses by the Independent Fiscal Institution (IFI) point to specific areas of pressure. Here are the main reasons economists and the government itself recognize as challenges:

1. Rising public debt and shrinking fiscal space

Gross general government debt reached about 82.9% of GDP in August 2026—the highest level since 2021 and more than 10 percentage points above the start of the current term.

Interest costs already exceed R$1 trillion per year. This reduces the room for investment and discretionary policies (currently about 8% of the Budget). Without a greater consolidation effort, the trend is likely to continue upward.

2. The 2026 “giveaway package” puts pressure on 2027

Measures announced during the election year (increases to Bolsa Família, expansion of programs, forgiveness of MEI debts, changes to Pix, etc.) are estimated to have an impact of between R$290 billion and R$300 billion across 2026 and 2027.

IFI calculations indicate that this could increase the debt by about 1.2 percentage points of GDP by the end of 2027. A significant portion of the cost falls precisely in the first year of the new term.

3. The 2027 Budget depends on optimistic assumptions

The government submitted the 2027 Draft Budget Bill (PLOA), projecting an effective primary surplus of R$18.6 billion and GDP growth of about 2.5%.

The market (Focus and Prisma Fiscal) expects much lower growth (a median of around 1.4%) and a primary deficit. The difference between these two outlooks creates a risk of spending freezes or the need for new revenue measures or spending cuts during the year.

The government itself already acknowledges that, starting in 2028, there will not be enough resources to maintain current policies within the fiscal framework (R$15.8 billion in 2028, with amounts rising in subsequent years), because mandatory spending is growing faster than discretionary spending.

4. High interest rates and weaker growth

With debt high and uncertainty over the pace of fiscal adjustment, the market expects the Selic rate to remain high in 2027 (the government estimates an average of 12.53%; private-sector forecasts vary).

Lower growth + high real interest rates make it harder to reduce the debt-to-GDP ratio and weigh on consumption, private investment, and employment.

5. Tax burden and competitiveness

Measures such as the gradual reintroduction of payroll taxes and changes to PIS/Cofins tax credits are already increasing the effective tax burden on industrial and retail sectors (simulations point to double-digit increases in some cases). In 2027, the more intensive transition to the tax reform (CBS) begins, creating additional uncertainty about final rates and the impact on businesses.

What this means in practice

Greater risk of short-term volatility in the exchange rate, futures interest rates, and the stock market if investors do not see a credible consolidation plan.

Pressure to choose between maintaining social spending and investment or stabilizing the debt.

Potential growth lower than what is needed to improve the situation without tax increases or spending cuts.

Important: these are risks highlighted by official data, the IFI, banks, and analysts. The final outcome depends on the concrete measures adopted starting in January—both fiscal adjustment measures and reforms that boost productivity. The positive social legacy (income-support programs, employment, etc.) remains, but the fiscal position has become tighter and requires difficult decisions in the first year.

Main sources: 2027 Draft Budget Bill (PLOA), IFI reports, Focus/Prisma Fiscal, analyses by banks, and articles from Estadão, Folha, Valor, O Globo, and Reuters (October 2026). #EarningsSeason #politica #brasil