(Recasts to add details of new fiscal views)

By Lisandra Paraguassu

BRASILIA, Oct 22 (Reuters) - Brazil has given up on its goal of seeking a primary budget surplus this year and instead will record a shortfall of 70 billion reais ($18 billion) amid escalating economic and political turmoil, a senior government source said on Thursday.

President Dilma Rousseff's administration is preparing to send Congress the new projection for the primary deficit, or the excess of expenses over revenues excluding debt servicing, said the source, who requested anonymity because of the sensitivity of the issue.

About 50 billion reais of that shortfall will be attributed to a sharp decline on recurring revenues such as tax collections that plummeted in the wake of the country's worst recession in 25 years. The remainder will come from the accounting of liabilities that the government owes state-controlled banks and remain in arrears, the source added.

Two government officials told Reuters earlier in the day that the estimate for that last item could be of up to 35 billion reais. The country's Federal Accounts Court ruled this month that Rousseff manipulated the budget last year by delaying payments to state banks, which helped finance social stipends - a practice banned by the Constitution.

The ruling has emboldened Rousseff's opposition, which is calling for her impeachment. The new fiscal goal has to be approved by an increasingly hostile Congress.

The outlook for a record primary deficit highlights just how difficult it has become for Rousseff to shore up government accounts and regain the confidence of investors backing away from the slumping economy.

Brazil's fiscal woes have triggered a slew of rating downgrades that threaten to further sink an economy heading for what many experts expect to be its longest recession since the 1930s.

In July, the government cut this year's primary surplus goal to 8.7 billion reais, or 0.15 percent of gross domestic product, from 66.3 billion reais, the equivalent of 1.1 percent of GDP, in its original budget.

Even if the government scores a surplus next year, the accounts remain far from being balanced. Brazil's overall budget deficit has ballooned to more than 9 percent of GDP.

($1 = 3.9041 Brazilian reais) (Additional reporting and writing by Alonso Soto; Editing by Guillermo Parra-Bernal and Lisa Shumaker)