Brazil’s Economic Forecast for 2025 Taking a Downturn
As Brazil gears up for the coming year, the financial markets are readjusting their projections for 2025, and the outlook is not as sunny as previously anticipated. The latest edition of Brazil’s Central Bank’s Focus Bulletin has painted a more pessimistic picture, indicating higher inflation rates and a smaller Gross Domestic Product (GDP) for the upcoming year.
Here are the key takeaways from the recent update:
- The Broad Consumer Price Index (IPCA) is expected to end 2025 at 4.96%, up from the previous forecast of 4.86%. This marks the 11th adjustment to the inflation projection and the ninth for the exchange rate between the Brazilian real and the US dollar.
- The report compiles the expectations of various financial market participants, including investment banks and asset managers. Interestingly, the projections in the Focus Bulletin are gloomier than the official forecasts provided by the federal government, which estimated an IPCA of 3.1% for next year.
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The forecast for the average exchange rate of the US dollar against the Brazilian real has also been revised upward to R$ 5.96 for 2025. This is a consistent trend as the estimate has been raised for the ninth consecutive time. In comparison, the government’s prediction stands at R$ 4.98 for next year.
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Despite the negative adjustments in other areas, the forecast for the Selic basic interest rate holds steady at 14.75% per annum for 2025, remaining unchanged from the previous week. Looking ahead to 2026, the rate is expected to decrease slightly to 12%.
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In terms of GDP growth, the financial market adjusted its projection to 1.8% for 2025, a slight dip from the previous 1.9% estimate. This marks the second consecutive week of downward revisions. Meanwhile, the government’s forecast for GDP growth in 2025 stands at 2.5%.
As Brazil faces economic uncertainties heading into the new year, it will be crucial for policymakers and financial institutions to closely monitor these projections and adapt strategies accordingly to navigate the challenges ahead. It is imperative to stay vigilant and agile in response to the evolving market conditions to ensure economic stability and growth in the coming year.
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