Goldman Sachs has expressed concerns regarding Brazil’s fiscal management under President Luiz Inácio Lula da Silva.
The firm criticizes the government’s continued high public spending, questioning its ability to meet fiscal targets, especially the elimination of the primary deficit by 2024.
Goldman Sachs describes Brazil’s fiscal strategy as excessively expansionary.
This approach, coupled with a shaky fiscal framework, seems unlikely to reduce inflation to the 3% yearly goal.
Inflation estimates for 2025 and 2026 hover around 3.51% and 3.50%, challenging the Central Bank’s plan to lower Selic rates.
February witnessed the public sector deficit growing to R$ 48.9 billion ($9.78 billion), a significant rise from the previous year.
This increase primarily reflects the central government’s deficit, despite surpluses from states, municipalities, and state-owned companies.
The primary deficit reached 2.44% of GDP over the past year, underscoring the central government’s larger share of fiscal imbalances.
Notably, judicial rulings and social benefits, totaling R$ 93 billion ($18.6 billion), have exacerbated government expenses.
Alberto Ramos and his team at Goldman anticipate persistent primary deficits, with national debt likely to rise further.
Achieving fiscal stability, they argue, requires structural surpluses of over 2% of GDP—a challenging feat in the near term.
Echoing Goldman’s skepticism, Itaú Unibanco points to high fiscal risks despite recent tax revenue spikes and GDP growth prospects for 2024.
The bank’s analysis, led by Mario Mesquita, underscores the government’s reluctance to reduce expenditures.
It warns that any premature changes to fiscal targets or frameworks could harm governmental credibility, forcing reliance on increased revenue rather than spending cuts.