When questioning more than twenty economists from various schools of thought about the main economic challenge for the future government, g1 identified the balance of public accounts as the most relevant topic.
Concern over fiscal health is a consensus among experts. This problem initially manifests in the primary balance—the difference between government revenues and expenditures—and culminates in the increase of public debt.
Currently, Brazil's gross debt reached its highest level since April 2021, the period of the Covid-19 pandemic. In August of this year, public sector indebtedness, which includes the federal government, Social Security, states, and municipalities, reached R$ 11.05 trillion.
This indicator is rising and corresponds to 82.9% of the Gross Domestic Product (GDP), meaning that the debt is equivalent to approximately ten months of the Brazilian economy's total production.
In this context, a solid adjustment in public accounts is seen as the basis for any plan to revitalize the national economy. The expectation is that a more stable debt trajectory can reduce pressure on interest rates and inflation, creating an environment conducive to greater consumption, investment, and growth.
The logic of current risk is clear: when the government spends persistently more than it collects, it needs to take on more debt. The higher the debt and the greater the uncertainty about its sustainability, the greater the investors' distrust. Consequently, the government has to pay higher interest rates to finance itself, which can raise inflation and keep the basic interest rate, Selic, at high levels, making credit more expensive for companies and families, resulting in slower growth.
View of Maílson da Nóbrega, former Finance Minister
Maílson da Nóbrega, former Finance Minister, emphasizes that the elected president must quickly present concrete adjustment measures, either by defining areas of attack or detailing planned actions. He warns that the absence of these measures until the beginning of the mandate could cause a collapse of expectations and macroeconomic deterioration, manifested by the rise of the dollar, the increase in future interest rates, and the restriction of bank credit.
Among the challenges pointed out are: increasing productivity through more qualified labor and more efficient companies; reducing the weight of family and business debt in a high-interest rate scenario; implementing reforms and improving the business environment, such as tax reform; adapting the Brazilian economy to geopolitical tensions, maintaining strategic ties with the United States and China; and creating conditions to attract infrastructure investments without harming fiscal adjustment.
Adriana Dupita, an emerging markets economist at Bloomberg Economics, points out that, unlike other periods, there are no obvious solutions because a drastic cut in spending would not work. She explains that mandatory expenses represent more than 90% of total spending, half of which is linked to the minimum wage. Building social, legislative, and judicial support for reforms that reduce these costs will be difficult, given the country's inequality. Furthermore, she mentions that debt, climate risks, population aging, and the need to plan the impact of artificial intelligence will require new ideas and more public resources.
Perspectives of Alex Agostini, Chief Economist at Austin Rating
For Alex Agostini, the primary challenge for the next president will be stabilizing public accounts until 2030, resuming government surpluses, and decreasing the proportion of public debt relative to GDP. He also highlights the importance of maintaining a well-balanced diplomatic and external relationship, especially after recent disputes between Brazil and the United States. Agostini stresses that this challenge applies to any candidate, regardless of political affiliation.
He observes that the US has interests in critical minerals and rare earths, but such issues depend on Congress. Furthermore, he raises the question of how external relations with China, Brazil's main trading partner, will be. Finally, Agostini warns that another major obstacle will be preventing the economy from losing momentum and entering a recession, thereby worsening household debt.
Analysis by Alexandre Pires, Professor at Ibmec SP
Alexandre Pires assesses that although the fiscal issue persists across different administrations, public accounts will reach 2026 in a condition that will demand unprecedented fiscal effort. He recalls that high public debt pressures the Selic rate, forcing the Central Bank to adopt a more restrictive stance to control inflation.
According to Pires, Brazilian growth will stop depending on the increase in the economically active population and will start depending on investments. However, high interest rates make investment in capital and productivity unattractive, which has led Brazil to register a gradual slowdown in growth, falling below the global average in recent years.
Opinion of Alexandre Schwartsman, former Central Bank Director
Alexandre Schwartsman considers the challenges numerous but places public accounts as the most urgent issue. For him, it is necessary to implement a set of measures that can slow down the increase in public spending in the coming years. This would allow the federal government to resume positive primary balances, thus reversing the trend of public debt growth.
André Galhardo, chief economist at Análise Econômica, adds that, besides organizing finances, the country needs to advance in already initiated reforms, such as the tax reform. He argues that simplification must lead to making the tax system more progressive, providing support to low-income families, businesses with fewer resources, and, above all, small and medium-sized enterprises.
Galhardo also advocates for a broad process of debureaucratization to improve the business environment, combined with a gradual fiscal adjustment. He argues that any abrupt shock could trigger a recession, repeating difficulties seen between 2015 and 2019, making it more prudent to improve the environment than to seek account control at any cost.
André Perfeito, chief economist at Garantia Capital, notes that the current situation is positive, given that unemployment remains low despite high interest rates. He explains that the drop in unemployment raises wages, increasing demand, but also increases the production cost for companies. This scenario creates a dilemma: should companies invest to meet demand or invest in productivity to cut costs? However, with high interest rates, both options are difficult, and the prospect of high interest rates reduces profits. The big challenge, according to Perfeito, is to reduce interest rates while the labor market remains strong, a phenomenon linked to changes in the labor market, where people can easily become drivers or delivery people via applications.
André Roncaglia, executive director of Brazil at the IMF and adjunct professor at UnB, points out that the main challenge is managing high household and corporate debt without compromising economic growth. He recognizes Brazil's recent economic resilience but observes that this resilience came with credit expansion and increased debt in high-cost sectors. In his analysis, future growth will tend to depend less on credit and more on productivity gains, investments, and structural reforms.
