Brazil Economic Outlook. June 2025

Summary

Domestic demand remains strong, despite some recent signs of moderation. However, the lagged effects of sharp monetary tightening—now mostly over—along with less expansionary fiscal policy and a less supportive global backdrop are expected to pave the way for a deceleration of both GDP growth and inflation.

Key points

• Key points:
• Growth is forecast to slow to 2.2% in 2025 and 1.6% in 2026, down from 3.4% in 2024. Economic activity exhibited strength in 1Q25, supporting an upward revision of the forecast for 2025. However, tighter economic policies and a less supportive global environment are likely to weigh on growth, particularly in 2026, when it is expected to fall short of earlier forecasts.
• Inflation is expected to gradually ease, reaching 5.0% in Dec/25 and 4.0% in Dec/24. On top of the expected softening of domestic demand, inflation should also be helped by lower commodity prices and a stronger Brazilian real.
• The monetary tightening cycle is mostly over. Although an easing cycle may begin at the end of this year, the Selic rate will likely remain above the estimated neutral level of around 10%.
• Fiscal risks persist, as structural problems remain unaddressed and the government’s commitment to consolidation is still uncertain. Still, the most likely scenario is a waning fiscal impulse, compliance with adjusted targets, and avoidance of a fiscal crisis.

Geographies

Topics

Tags