Economic Outline

Economic Indicators

Brazil is the largest economy in Latin America and ranks among the world’s top ten by nominal GDP. With a diverse industrial base and abundant natural resources, it also stands in the top seven by purchasing power parity. Over the last few years, Brazil’s economy has shown remarkable resilience and performed better than expected in 2024, growing an estimated 3% with a positive contribution from domestic demand from the private sector. However, growth is expected to slow to 2.2% in 2025 and 2026 (IMF). Household consumption, accounting for around two-thirds of GDP, should remain the main growth driver, supported by a tight labour market and minimum wage adjustments boosting real incomes. However, its expansion will ease due to the lagged impact of tight lending conditions.

Public accounts remain a weak point for Brazil, with mandatory spending making up 92% of total expenditures (Coface). In November 2024, the government proposed a budget plan with spending cuts of 0.6% of GDP for 2025–2026 to meet primary balance targets. However, markets found the cuts inadequate, weakening the Brazilian Real. A diluted version of the plan passed Congress in December 2024. The IMF estimated the budget deficit to be 8.2% in 2024 (from 7.4% one year earlier), with a primary deficit of USD 3.3 billion, narrower than the maximum shortfall permitted under its fiscal rules. For 2025, the deficit is expected to hover around 8%. The high gross public debt has been following an upward trend in recent years, reaching 87.6% of GDP in 2024. The trend is anticipated to continue over the forecast horizon, with the debt-to-GDP ratio reaching 94.7% by 2026 (IMF). In 2024, inflation reached 4.83%, according to government data. In response to rising inflation expectations, fiscal uncertainties, and a 27% depreciation of the Brazilian Real against the USD, the central bank resumed monetary tightening, ending the year with a 12.25% policy rate, with a forecast for a further increase. For 2025 and 2026, the IMF forecasts the inflation rate to ease to 3.6% and 3.1%, respectively.

According to IBGE, the annual unemployment rate was 6.6% in 2024, the lowest index in the time series started in 2012. The rate stood at 5.1% for men and 7.6% for women. By education level, those with incomplete secondary education had the highest unemployment rate (10.3%). Among individuals with incomplete higher education, the rate was 6.6%, double that of those with a completed higher degree (3.3%). Overall, the country continues to face social issues and has one of the highest levels of inequality in the world, with high disparities between the country's regions. Even though Brazil has lifted millions of people out of poverty in the last 15 years, 10% of the population still lives in poverty, while the country's richest 5% have the same income as the remaining 95% of the population. Data from the IBGE shows that 8.7 million people were lifted out of poverty in 2023, and the poverty rate dropped from 31.6% to 27.4% of the total Brazilian population.

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