05.06.2026
Brazil’s economy slowed in 2025 after several years of resilient growth, as tighter monetary policy, weaker private consumption and softer investment weighed on activity. Growth is expected to moderate further in 2026 before recovering gradually in 2027 as monetary easing resumes and structural reforms continue. Inflation has declined but remains above the Central Bank of Brazil’s 3% target, while fiscal risks remain the main macroeconomic vulnerability. The current account deficit is expected to narrow gradually, supported by weaker import demand and continued foreign direct investment inflows.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 2.3 | 1.6 | 1.8 |
| Inflation (%, yoy) | 4.3 | 4.0 | 3.9 |
| Employment rate (% of working-age population, 15+) | 58.6 | 57.8 | 57.4 |
| Fiscal balance (% of GDP) | -8.1 | -8.7 | -8.3 |
| Gross public debt (% of GDP) | 78.6 | 82.3 | 85.7 |
| Current account balance (% of GDP) | -3.0 | -2.5 | -2.3 |
Growth slows under tight financial conditions
Brazil’s real GDP growth moderated to 2.3% in 2025, down from 3.4% in 2024. The slowdown reflected weaker private consumption and investment after a period of strong household income gains and high credit growth. Agriculture remained supportive after a strong harvest, while services continued to expand but at a slower pace.
Growth is projected to slow further to 1.6% in 2026 before recovering to 1.8% in 2027. Elevated interest rates, global uncertainty and softer labour-market gains are expected to weigh on household consumption, investment and exports. Over the medium term, growth should improve gradually if tax reform, business-environment reforms and productivity-enhancing investment continue.
Inflation declines but remains above target
Inflation eased to 4.3% in 2025, helped by lower food prices and currency appreciation. However, services inflation and demand-driven pressures remain persistent, reflecting a tight labour market, strong wage growth and resilient consumption.
Inflation is projected to decline only gradually, to 4.0% in 2026 and 3.9% in 2027, remaining above the 3% target. The Central Bank began a cautious easing cycle in 2026 after holding rates high through much of 2025, but further cuts will depend on inflation expectations, fiscal credibility and external risks. Higher oil prices, exchange-rate volatility and fiscal uncertainty could delay disinflation.
Fiscal risks remain the key vulnerability
The general government fiscal deficit widened to 8.1% of GDP in 2025, driven mainly by very high interest payments and an insufficient primary balance. The primary deficit remained small, but not large enough to stabilise debt under elevated financing costs.
The deficit is projected to widen to 8.7% of GDP in 2026 before narrowing slightly to 8.3% in 2027. Gross public debt is expected to rise from 78.6% of GDP in 2025 to 85.7% in 2027. Brazil’s flexible exchange rate, deep domestic financial market and low foreign-currency public debt provide buffers, but faster fiscal adjustment will be needed to anchor expectations and reduce borrowing costs.
External position remains manageable
The current account deficit remained at 3.0% of GDP in 2025 and was largely financed by foreign direct investment. International reserves remain sizeable, providing an important external buffer. The real appreciated in 2025 after a sharp depreciation in 2024, supported by high interest rates and US dollar weakness.
The current account deficit is projected to narrow to 2.5% of GDP in 2026 and 2.3% in 2027 as import growth slows with softer domestic demand. Brazil’s external position is supported by agriculture, mining, energy exports and diversified commodity production, but remains exposed to Chinese demand, commodity prices, global interest rates and climate shocks.
Overall outlook
Brazil’s outlook remains stable but constrained. Growth is expected to slow in 2026 before recovering gradually, while inflation should decline only slowly toward target. The main risk is fiscal: high interest costs and rising public debt could keep monetary conditions tighter for longer and weaken investment. Sustained improvement will depend on credible fiscal consolidation, implementation of tax reform, productivity growth, better infrastructure, climate resilience and reforms that improve education, skills and business competitiveness.
Sources:
World Bank, Brazil Macro Poverty Outlook, April 2026.
International Monetary Fund, Brazil: 2025 Article IV Consultation and Staff Report, July 2025.
International Monetary Fund, World Economic Outlook, April 2026.
Central Bank of Brazil, Monetary Policy Report, March 2026.
Central Bank of Brazil, Focus Market Readout, May 2026.
