Why Brazil should brace itself for slower growth in 2025

Brazil's economy is expected to register slower growth in 2025, while fiscal problems and inflationary pressure will persist.

The economy should expand 2.01%, compared with projected growth of 3.49% in 2024, according to the weekly survey of the central bank with 100 economists.

“We need to remember that in recent years, most economists have been wrong in their predictions for Brazil’s GDP, which has surprisingly performed well, with better results than expected,” Roberto Troster, former chief economist at banking federation Febraban, told BNamericas.

“However, we cannot disregard that there are now more signs that economic performance [in 2025] will be weaker than [in 2024], such as higher interest rates and persistent fiscal challenges that impact the government’s ability to invest in the economy,” Troster, now an economist at Troster & Associados, said.

The central bank survey respondents expect the Selic policy rate to reach 14.75% by the end of 2025, compared with 12.25% currently.

The monetary authority started a tightening cycle amid inflationary pressures.

Inflation, measured by the IPCA index, is expected to reach 4.96% in 2025, compared with 4.90% estimated for 2024.

"I see the Selic rate ending [2025] at a level higher than expected by analysts, at around 15%, as the central bank is likely to have more work to manage inflation expectations due to a growing belief that the government will not be able to adopt stricter fiscal measures," Luis Otavio Leal, chief economist at asset management firm G5 Partners, told BNamericas.

Slowing growth will likely affect Lula’s reelection plans.

"Lula's approval ratings are not high, even at a time when the economy has expanded and unemployment rates are historically low. If there is a negative reversal in the economic scenario, Lula's approval ratings are likely to decrease, which puts his intention to be reelected in 2026 at risk," André Pereira César, a political analyst at Hold Consultoria, told BNamericas.