Brazils National Confederation of Industry (CNI) and leading financial institutions now forecast a marked slowdown for Latin Americas largest economy in 2025.After a robust 3.4% GDP expansion in 2024, projections for 2025 range from 1.6% to 2.3%.
This deceleration stems from a blend of persistent inflation, high interest rates, and fading fiscal stimulus, according to recent CNI and Central Bank reports.The Central Banks aggressive monetary tightening since August 2024 pushed the Selic rate from 10.5% to 14.25%.
Analysts expect it to reach 15% by year-end.These high rates have curbed inflation, which financial markets now see at 5.57% for 2025, but they have also made credit more expensive and investment less attractive.The real cost of borrowing remains among the highest globally, and this restricts both business expansion and household consumption.
Fiscal policy has also tightened.
The government has scaled back spending after a period of stimulus in 2024.Industry Leaders Signal Economic Deceleration for Brazil in 2025.
(Photo Internet reproduction)Fiscal targets for 2025 will likely be met, but only through additional adjustment measures.
Even so, public debt is expected to keep rising, as the primary deficit is projected near 0.6% of GDP.The risk of fiscal slippage remains, especially with general elections approaching and political pressures mounting for more public outlays.
On the demand side, the labor market continues to show resilience.Brazils Job Growth Slows in 2025FecomercioSP expects Brazil to create between 1.2 and 1.5 million new formal jobs in 2025, down from over 2.2 million in 2024.
The service sector, which accounted for more than half of new jobs last year, will continue to drive employment.Infrastructure projects like So Paulos Metro Line 6 are generating thousands of construction jobs, but the overall pace of job creation will slow.Agriculture stands out as a bright spot.
Economists expect a record harvest in 2025, which should invigorate the sector after a weak performance last year.This rebound will help offset weaker growth in industry and services, but it cannot fully counterbalance the drag from high borrowing costs and cautious fiscal policy.Brazils external position remains stable.
The trade surplus is forecast at $75 billion in 2025, and foreign direct investment should hold steady at $70 billion.The exchange rate, however, faces pressure, with the real expected to depreciate to 5.90 per US dollar by the end of the year.
The real story behind the numbers is a country adjusting to the limits of its recent growth.Policymakers face tough choices: keep inflation in check with high rates or risk renewed price pressures by easing too soon.
Fiscal restraint is necessary to avoid turbulence, but it slows the recovery.The business environment remains challenging, with structural reformssuch as tax simplificationoffering some hope for improved productivity in the medium term.
For now, Brazils economy is cooling, and businesses must navigate a landscape defined by caution, not exuberance.