Brazil Economic Outlook. March 2026

Summary

GDP is forecast to remain close to 2%, while inflation is expected to hover around 4% ahead, following a marked deceleration in activity throughout 2025. As a net oil exporter, Brazil has limited exposure to the conflict in the Middle East, but it could still be negatively affected if tensions persist beyond a few weeks.

Key points

• Key points:
• Growth slowed to 2.3% in 2025 and is still forecast to reach 1.7% in 2026 and 2.2% in 2027, closer to potential rates (around 2.3%) and less than the 3.2% 2022-24 average. Brazil is a net oil exporter and has limited direct exposure to Middle East tensions, but would be negatively affected if they escalate beyond expectations.
• Inflation will likely remain near the upper bound of the 1.5%–4.5% target range. The sharp increase in global energy prices (assumed to be temporary) will pressure inflation upward, broadly offsetting the impact of more positive price dynamics since the middle of 2025 and of a stronger exchange rate than anticipated (despite Middle East tensions).
• The monetary easing cycle is still likely to start in Mar/26, despite larger uncertainty. However, concerns about spillovers from the war in Iran now make a 25 bp cut more likely than the 50 bp previously expected. The Selic rate is forecast to reach 11.75% this year and 10.00% in the next one. Global factors and fiscal risks pose upside risks to these forecasts.
• The Brazilian real is likely to weaken somewhat moving forward due to external volatility, a falling Selic and pre-election uncertainty. However, the depreciation is likely to be softer than expected before, at least if the US dollar remains weak and the global turbulence proves short-lived.

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