Overview
A July poll of 40 analysts conducted from July 6 to 10 projects that Brazil will continue to register only moderate economic growth after the presidential election in October. The median forecasts point to gross domestic product expanding 1.9% this year and 1.8% in 2027, estimates that are virtually unchanged from those collected in April.
Agricultural outlook and El Niño
Forecasters flagged a decline in farm output tied to rising temperatures associated with the El Niño weather pattern. Economists at XP Investimentos reduced their projection for the primary sector's GDP growth in 2026, trimming it to 1.5% from a previous 3.0% largely because of expected impacts on crop yields from warming conditions. That downward revision for agriculture contributes to the case for continued fiscal support in the near term.
Fiscal strategy and political context
Respondents to the poll suggested that efforts to narrow budget deficits next year may rely more on increasing taxes than on cutting spending, a shift that could perpetuate a spending-led growth approach. Eight of 18 answers to an additional multiple-choice question indicated higher taxes as the most likely policy to meet difficult fiscal targets. Six responses favored spending cuts, three favored other measures and one selected "none." Notably, no respondent expected proceeds from privatizing state assets to be a source of revenue.
Commenting on the political backdrop, economists at Societe Generale wrote: "Our base case remains that a likely Lula victory is accompanied by further fiscal support ahead of the election, putting pressure on public finances and weighing on investor sentiment." That assessment links anticipated pre-election fiscal measures to continued strain on the budget.
Budget composition and deficits
Analysts emphasized the constraint posed by Brazil's budget structure, where more than 90% of spending is mandatory and therefore difficult to trim. Rafael Prado, an economist at GO Associados, noted this feature as an inherent limit on the government's ability to cut costs. Under the current fiscal framework, the country has been running a primary deficit alongside "quasi-fiscal" measures such as sectoral loan programs and a large interest bill, which together sustain a significant general budget shortfall and rising debt levels.
The Treasury has indicated the government’s plan is only expected to start producing small primary surpluses from 2028 and that additional fiscal measures will be required, a June statement said, but it did not provide detailed plans on what those measures would entail.
Pensions and reform prospects
Pensions, which constitute the principal legally mandated expenditure that is difficult to reduce, have been increasing rapidly. Economists cited pension costs as a central fiscal challenge and suggested that any incoming administration should prioritize pension reform, while acknowledging that such reforms are likely to encounter political and practical difficulties.
Inflation and monetary policy
Inflation forecasts from the poll rose slightly versus April, with expectations now averaging 4.7% for this year and 4.1% for 2027, up from 4.5% and 3.9% in the prior survey. Given lingering concern about consumer price developments, respondents generally expected the central bank to enact only a single additional quarter-point reduction from the current policy rate of 14.25%, bringing it to 14.00% during the remainder of the year. This view contrasts with a June survey that had pointed to a larger 50 basis point easing.
Societe Generale economists added a rate outlook note: "On rates, we continue to expect the BCB to resume easing later this year and forecast 50 bps of cumulative cuts by year-end, although the path has become more complicated by renewed Middle East tensions, higher oil-price risks and lingering geopolitical uncertainty." The end-2027 consensus for the Selic rate in the poll remained unchanged at 12.00%.
This analysis summarizes the poll outcomes and the key economic and fiscal themes highlighted by respondents, including weather-related agricultural risks, limited fiscal flexibility, pressures from mandatory spending such as pensions, and a cautious trajectory for monetary easing.