Brazil economic outlook shifts as inflation cools and fiscal targets adjust

Brazil's economic indicators show a mix of cooling inflation and shifting fiscal projections. A 0.40% deflation in the August IPCA-15 index has led to a reduction in the projected Selic interest rate for the end of 2026, moving from 14.00% to 13.25%. Economists are also revising inflation forecasts downward, with some estimates for 2026 dropping from 5% to 4.6%.

Regarding fiscal policy, the Ministry of Finance reported a primary surplus of R$ 10.783 billion in July, the best monthly result since 2022. However, the cumulative deficit for 2026 remains at R$ 81.305 billion. Looking ahead, Planning Minister Bruno Moretti stated that the 2027 Budget is expected to forecast a 'real' surplus between R$ 18 billion and R$ 20 billion, aiming to stabilize public accounts through a 0.5% GDP adjustment in the first year of the next administration.