The upcoming Brazilian elections are unprecedented in several different ways. On the one hand, never before has the country seen the degree of polarization that has come to define this presidential race. On the other, given the specific characteristics of the candidates most likely to be in a potential runoff – a hard-right firebrand and staunch supporter of Brazil’s military dictatorship, and a left-wing politician from corruption-mired PT (Brazil’s Worker’s Party) – these elections are bound to be a referendum on democracy and on corruption.

Individually, the two candidates most likely to be in a runoff on October 28, former army captain Jair Bolsonaro, and left-wing Fernando Haddad, are weak candidates. For the past several weeks polls have been showing that each would lose by a large margin if their opponents came from the centrist camp – either the center-right, or the center-left. However, given the inability to articulate a clear centrist message, the electorate has been galvanized by anger, resentment, and a clear desire to obliterate the establishment. Under these circumstances, how is the economy likely to fare under Bolsonaro or Haddad?

Whoever wins will face daunting challenges from day one. After suffering through the worst recession to ever hit Brazil, the economy has not quite recovered. Although growth has been restored, it has not been enough to create jobs for the more than 13 million unemployed Brazilian workers. Inflation has remained fairly contained despite recent financial market turbulence, but wages are stagnant. Most importantly, Brazil has high and uncontrolled fiscal deficits and a debt-to-GDP ratio that is unsustainable over the medium term – it is likely that without major reforms, debt could reach 100 percent of GDP in the next two years. Addressing Brazil’s fiscal problems requires a comprehensive short-term fiscal adjustment accompanied by pension reform. The outgoing Temer administration had promised to deliver a pension reform, but that has not materialized.

Fiscal adjustment will be hard to orchestrate in an economy that is already weak – it’s short run effects through rising taxes and lower spending would further undermine growth. Pension reform, though urgent, is extremely unpopular under any circumstance, let alone in a situation where the population is reeling from high unemployment and low growth. It is therefore hard to overstate the difficulties that the next government will face in adopting measures to address Brazil’s fiscal problems. Without these measures, the country will head into an inevitable fiscal crisis.

Neither Bolsonaro nor Haddad have formulated clear economic plans. The left-wing candidate has denied that pension reform is necessary, but has failed to produce an alternative plan to fix the country’s fiscal problems. Hard-right Bolsonaro has endorsed pension reform, but has not given any indication of what his proposal would entail. Both candidates, if elected, will face a highly fragmented Congress, possibly hostile to unpopular measures. Neither candidate has the political experience necessary to build stable coalitions in Brazil’s highly fragmented legislature. Bolsonaro’s Social Liberal party, PSL, hardly has any congressional presence, making the task of governing through coalitions even more difficult. Haddad’s Worker's Party (PT) does have a more solidified structure, but will likely face substantial opposition reflecting the anti-PT mood that has engulfed part of the electorate. Bolsonaro has promised to halve the number of Cabinet positions making his coalition building efforts even harder: Under Brazil’s system of coalitional presidentialism, coalitions are built by handing off Cabinet positions to allied parties. It is partly for this reason that the number of ministries has grown steadily since re-democratization. To be sure, both candidates would need to have strong coalitions to pass the needed measures to address Brazil’s fiscal issues.

The political economy and the economic implications of a Haddad or a Bolsonaro administration, are, therefore, more similar than markets would like to admit. Currently, markets appear to have become convinced that Bolsonaro would govern as a pro-market ultraliberal because of his choice for Finance Minister: Paulo Guedes, a University of Chicago PhD and a veteran of financial markets. However, throughout his public life, Bolsonaro has always espoused nationalistic views, with a preference for state intervention. It is unlikely that his views have changed much, and hence his pick to run the economy may leave office sooner than most realize. Haddad, on the other hand, would likely need to bow to the wishes of a more radicalized PT leadership thus attempting to stave off hard line fiscal measures. In one way or another, the outcome is broadly the same: The increased likelihood of a severe fiscal crisis, the very same crisis that the country tried to avoid with the impeachment of Dilma Rousseff and her replacement with outgoing Michel Temer. There is thus little to cheer and much to be concerned about.