So far, there is no indication that the Brazilian economy will not grow by 2.1% this year. Last year, GDP grew by 3.4%, the best performance since 2011 (excluding distortion caused by the pandemic’s excessive variance). After the Great Recession (2014-2016) and before the pandemic, from 2017 to 2019, the average growth rate was a miserable 1.4% per year. The landing will be smooth.
This Thursday (4), IBGE releases third-quarter GDP and possible revisions. More or less informed, the quarterly figure should not change the outlook for this year.
The result may cause some political uproar if it shows zero (statistically, nothing but 0.1%). Who knows, perhaps more severe insults will come from the central bank. For the average citizen, who does not know what GDP is and does not want to know (almost everyone), the number in itself is of no importance.
Regarding political matters, inflation is declining, especially food inflation, which reached about 8.1% annually in May and then fell to 3.6% in November. The increase in the number of people working slowed to a pace of 0.9% per year, the weakest since 2023, but still positive. Average salaries are growing at approximately 4% annually. It will not be the news of zero GDP that will upset masses of people.
For your information, the Ministry of Finance forecasts GDP growth of 2.2% in 2025. The average of 116 “market” estimates is 2.16% (this is the consensus forecast in the BC Focus Bulletin). Very similar.
For the third quarter, the most relevant estimates range between 0.1% and 0.3% growth (compared to the previous quarter). In this period, the results will not change the average forecast of about 2.1% for this year, except for some deviation in the basic numbers of the national accounts.
From the known data, this is an economy that, with low interest rates, has continued to grow at a respectable rate, although small relative to our needs (and it is not known whether it is sustainable). Respected and somewhat incomprehensible.
The world of work has changed in ways we still do not fully understand (in new supply and demand for jobs, and in response to interest rates). Inflation is far from target, but it is not crazy and is falling slowly, with the unemployment rate remaining at historically low levels, while wages are growing. Estimates of growth in credit, banking or capital markets, including those calculated by economists at banks, have been revised upward. Even with stifling interest rates and the huge help provided by a falling dollar in the world and falling inflation in China, this is not easy to understand.
A more significant surprise may appear in the services sector or in private (“household”) consumption, which is expected to come at its lowest rate in more than two years, according to estimates.
There could be political uproar, as we have already said, and even more so if fourth-quarter GDP, which will be known next year, comes in at zero or in contraction. For 2026, the forecast, the most speculative, is around 1.7% (for the Treasury, 2.4%). We will see the hard-to-measure impact of income tax cuts, the potential expectation of repayment of court orders, crop size, and changes in oil prices and market interest rates (which fell further again at the end of October).
Very important: Find out what dollar rate we will have. A stronger dollar could limit the speed of interest rate declines in 2026.
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