Fitch Ratings maintained Brazil's Long-Term Issuer Default Rating at 'BB' and kept a Stable Outlook, citing the country's large and varied economy, solid external finances and a flexible exchange rate that afford it resilience to external and domestic shocks.
At the same time, the rating agency underscored several constraints on Brazil's credit profile. These include a government debt-to-GDP ratio that is both high and rising, persistent budget rigidities, relatively low governance scores and modest potential growth. Fitch's balance-sheet projections reflect those pressures.
Fitch forecasts the general government deficit will widen to 8.6% of GDP in 2026, up from 8.1% in 2025. By comparison, the median deficit for the 'BB' rating category is 3.5% of GDP. Fitch attributes the larger shortfall largely to an increased interest burden on the public finances.
General government debt rose to 78.6% of GDP in 2025 from 76.3% in 2024, and Fitch projects that debt will exceed 80% in 2026.
The agency expects the presidential race in October to be closely contested between Luiz Inacio Lula da Silva and Flavio Bolsonaro. Fitch said economic and fiscal strategies are likely to diverge depending on which candidate prevails, and that clarity on potential structural reforms to tackle Brazil's underlying imbalances will only emerge after the election.
On the macroeconomic front, Fitch projects real GDP growth of 2.1% in 2026, slightly below its 2.3% estimate for 2025, despite what it characterises as restrictive monetary conditions.
Inflationary pressures have strengthened recently, with inflation rising to 4.7% in May 2026 from 4.4% in April. Fitch points to elevated service inflation, higher food prices and a global energy shock as drivers. The agency expects inflation to reach 5% by the end of 2026, which would breach the upper bound of the tolerance interval around the central 3% inflation target.
Brazil's external position remains an offsetting strength. The current-account deficit was 2.9% of GDP in 2025, broadly unchanged from 3.0% in 2024. Fitch projects the deficit will narrow to 2.2% of GDP in 2026 as slower domestic growth reduces import demand and commodity exports rise.
International reserves stood at $371 billion in May 2026 and, according to Fitch's calculations, should cover 8.1 months of current external payments in 2026.
Reporting focused on the agency's assessment, fiscal and macroeconomic projections, and the near-term political context that could affect policy direction.