Key facts
- Lula said raising investment above 20% of GDP would be a central goal of his next term.
- Lula said his government would create the conditions to reduce interest rates.
- The central bank kept borrowing costs at 13.75%, halting its rate-cutting cycle.
- Gross public debt reached 82.9% of GDP, up more than 10 percentage points in Lula's current term.
- Household debt stands at 50.1% of income, which Reuters described as a record.
- Lula named no finance minister or other key appointments in the address.
Brazil's Luiz Inacio Lula da Silva said on November 8 that he would respect the country's budget rules and that his government would work to create the economic conditions for borrowing costs to fall, in a televised address setting out priorities for his fourth term. He announced no new measures to address investor concerns, Reuters reported.
"The trajectory of public debt and high interest rates concern me which is why I reaffirm my commitment to fiscal responsibility, enabling sustainable social policies and the much-needed expansion of investment," Lula said. "All of these efforts will be made while preserving fiscal rules," he added.
Lula said raising investment above 20% of gross domestic product, in partnership with the private sector, would be one of his government's main objectives, and that it would create the conditions to reduce interest rates.
The comments repeated commitments Lula has made since his election victory two weeks earlier, which Reuters reported weakened the real, pushed up long-dated interest rates and hit Brazil's benchmark stock index. Campaign pledges requiring additional spending have raised questions about how the administration can reconcile them with rising primary surplus targets, and markets have been unsettled by his decision so far not to name a finance minister or other key appointments.
The current government has committed to primary budget targets while limiting real spending growth to 70% of any rise in revenues. The framework caps annual expenditure growth at 2.5% above inflation, with a floor of 0.6%.
Gross public debt has risen by more than 10 percentage points during Lula's current term, reaching 82.9% of GDP. The central bank last week halted its rate-cutting cycle and kept borrowing costs at 13.75%, Reuters reported, prolonging pressure on households whose debt Reuters put at a record 50.1% of income. Economists now see interest rates staying elevated for longer and have cut their growth forecasts for next year, Reuters reported.
Lula won a fourth non-consecutive term on October 25, defeating right-wing Senator Flavio Bolsonaro in a runoff turnaround.