Brazil: Public Sector Fiscal Deficit Tracking at a Very High 9.6% of GDP, Gross Public Debt Rises to 81.1% of GDP (Ramos)

Research evidence excerpt

Brazil: Public Sector Fiscal Deficit Tracking at a Very High 9.6% of GDP, Gross Public Debt Rises to 81.1% of GDP (Ramos)

Economics Research

30 June 2026 | 7:56AM EDT

Brazil: Public Sector Fiscal Deficit Tracking at a Very High 9.6% of GDP,

Gross Public Debt Rises to 81.1% of GDP (Ramos)

Bottom Line: The consolidated public sector recorded a slightly higher than expected Alberto Ramos

+1(212)357-5768 |

R$56.1bn deficit in May. The consolidated public sector is running at a 1.14% of GDP alberto.ramos@gs.com

Goldman Sachs & Co. LLC

primary fiscal deficit, with the overall public sector fiscal deficit (primary surplus minus net

interest payments) at a high 9.62% of GDP. The fiscal deficit has exceeded 8% of GDP every

single year of the Lula administration. The stock of gross general government rose 90bp to

81.1% of GDP, up from 71.7% at end-22 (94.3% of GDP according to the IMF standard

definition), and is expected to continue to climb given the loose fiscal stance. Lack of

spending control has severely undermined the credibility of the fiscal targets and

contributed to an over-heated over-indebted economy. Furthermore, a weak fiscal anchor

has increased fiscal risk premia, leading to unanchored short- and medium-term inflation

expectations.

We expect the gross debt dynamics to remain on an upward trend in the coming

years. Placing the debt dynamics on a structural sustained declining trend and

building fiscal buffers remain key macro challenges. That would require structural

primary fiscal surpluses above 2% of GDP, which would contribute to lowering the

neutral real interest rate. Such an outcome is very unlikely in the near term, in our

view.

KEY NUMBERS (May):

Primary balance of the consolidated public sector: -R$56.1bn vs. consensus at

-R$53.0bn and GS at -R$54.0bn.