Brazil's 2027 Budget Projects First Primary Surplus Since 2022

Brazil's government has submitted its 2027 budget bill to Congress, projecting an effective primary surplus of 18.6 billion reais ($3.59 billion) for the central government, equivalent to 0.13% of GDP. If realized, this would mark the first annual primary surplus since 2022, when the surplus stood at 0.55% of GDP.

The government's projection is notably more optimistic than market expectations. Economists surveyed by the central bank anticipate a primary deficit of 0.4% of GDP in 2027 and do not foresee a return to balanced accounts until 2030. This divergence highlights the gap between Brasilia's fiscal consolidation outlook and investor skepticism, which is fueled by rapid growth in mandatory spending and a substantial interest burden.

Under the fiscal framework, the government can exclude certain expenditures when assessing target compliance, particularly part of its stock of court-ordered payments. On this adjusted basis, the government projects a primary surplus of 83.4 billion reais, or 0.56% of GDP, in 2027.

The central government's effective primary balance has remained in deficit during President Luiz Inacio Lula da Silva's current term. The shortfall was 2.42% of GDP in 2023, narrowed to 0.39% in 2024, and widened slightly to 0.46% in 2025. The government forecasts a deficit of 0.4% of GDP for this year.

The 2027 budget proposal also assumes economic growth of 2.46% and inflation of 3.6% for next year. Brazil's fiscal target for 2027 is a primary surplus of 0.5% of GDP, with a tolerance band of 0.25 percentage point in either direction.