Brazil has little room for a major fiscal shift because mandatory spending exceeds 91% of government outlays, while the U.S. midterms and France’s budget plan present tests, Morgan Stanley Chief Global Economist Seth Carpenter said.
Brazil’s spending structure would constrain a broad budget overhaul, Carpenter said. An election could still change individual fiscal policies, but the scale of a wider adjustment would be limited.
In the United States, Carpenter expects divided government to leave broad economic policy largely intact. A different congressional balance could restore some domestic spending and lift growth modestly. He said restrained military spending could offset part of that gain. He also warned that markets may not fully reflect the risk from a moderately restrictive credit cycle.
France’s current proposals would only stabilize the deficit, Carpenter said. In his assessment, higher taxes could slow growth, while spending cuts could weaken economic activity. He also described French borrowing costs as elevated.
U.S. voters are scheduled to go to the polls Tuesday, Nov. 3. The congressional balance could shape potential debt-limit talks in 2027, as EconoTimes has reported.
