market sees higher inflation, interest and fiscal deficit after Lula’s speech

The financial market began to change its projections after President Luiz Inácio Lula da Silva (PT) ruled out chances of zero deficit in public accounts in 2024.

According to the Focus bulletin, published by the Central Bank this Monday morning (30), banks and consultancies now expect higher inflation, basic interest rate and primary deficit next year.

Data collection was carried out on Friday (27), the same day that Lula stated that the government will “hardly” be able to eliminate the deficit. “Also because we don’t want to cut investments and works”, explained the president.

The goal of eliminating the deficit in public accounts next year is included in the new fiscal framework, prepared by the Ministry of Finance, which was sanctioned by Lula himself just two months ago. The PT member called the market “too greedy” for demanding compliance with this objective.

Analysts no longer believed that the government would meet its target, but signs of negligence from the Chief Executive could open the door to an even worse result.

The median projections for the 2024 primary deficit rose from 0.75% of GDP, in the previous report, to 0.78% in the edition released this Monday. When considering only the most recent expectations, released by banks and consultancies in the last five business days, the median indicates an even greater deficit, of 0.88% of GDP.

Meanwhile, the median expectation for inflation in 2024 went from 3.87%, in the report published a week ago, to 3.9%.

The forecast for the basic interest rate (Selic) at the end of next year also worsened. It had been stable at 9% for 11 weeks, and has now risen to 9.25%.