Brazil Keeps 2025 GDP Forecast Unchanged Amid Rising Inflation

Brazil’s government has kept its 2025 GDP growth forecast at 2.3% while increasing inflation estimates slightly to 4.9%. The central bank is expected to raise interest rates to combat inflation, influenced by fluctuating protectionist policies. For 2026, the growth forecast is 2.5%, with inflation expected to decrease to 3.5%.

On Wednesday, Brazil’s government reaffirmed its economic growth forecast for 2025, maintaining the figure at 2.3%. This announcement coincides with a slight uptick in the inflation estimate, attributed to minor adjustments in the baseline scenario. The finance ministry projects that the growth of Brazil’s gross domestic product (GDP) is expected to decelerate in the latter half of the year following a robust expansion in the first quarter.

Additionally, the central bank is undertaking a rigorous monetary tightening strategy, widely anticipated to include a third consecutive 100-basis-point interest rate increase to 14.25%. The finance ministry’s latest report estimates inflation for the year at 4.9%, an increase from the earlier prediction of 4.8% made in February. While food price inflation is expected to moderate by year-end, the costs associated with industrial goods are projected to rise.

The report also indicated concerns regarding rising protectionism affecting inflation levels, particularly referencing the tariff measures adopted by U.S. President Donald Trump. The finance ministry suggested that while protectionist policies could pressure inflation further, their impact might be countered by uncertainties affecting economic activity.

Looking ahead to 2026, the government anticipates growth to reach 2.5%, with inflation forecasted to decrease to 3.5%. This anticipated growth rate of approximately 2.5% is expected to extend into subsequent years, with inflation possibly aligning with the central bank’s target of 3% starting in 2027.

In conclusion, Brazil’s government has maintained its GDP growth forecast for 2025 at 2.3%, while slightly adjusting its inflation prediction to 4.9%. As the central bank anticipates a third interest rate increase, the effects of protectionism and industrial goods costs are critical factors affecting future forecasts. For 2026, a GDP growth estimate of 2.5% and lower inflation rates are anticipated, signaling a potential alignment with the central bank’s inflation target by 2027.

Original Source: money.usnews.com