The financial market’s forecast for the growth of the Brazilian economy this year rose from 3.42% to 3.49%. The estimate is in the Focus Bulletin this Monday (23), a survey released weekly by the Central Bank (BC) with projections for the main economic indicators.
With quarterly results, exceeding projections, in the third quarter of 2024, the Gross Domestic Product (GDP – the sum of goods and services produced in the country) grew 0.9% compared to the second quarter, according to the Brazilian Institute of Geography and Statistics (IBGE). The accumulated increase in the year, from January to September, is 3.3%. In 2023, Brazil’s GDP grew 3.2%.
The Central Bank itself also revised its estimate for the economic growth in 2024from 3.2% to 3.5%, after the “positive surprise” in the third quarter data.
For 2025, the financial market’s expectation for GDP varies from 2.01% to 2.02%. For 2026 and 2027, economists project GDP expansion of 1.9% and 2%, respectively.
The dollar exchange rate forecast is R$6 for the end of this year. At the end of 2025, the forecast is that the North American currency will be at R$5.90.
Inflation
In this edition of Focus, the forecast for the Broad National Consumer Price Index (IPCA) – considered the country’s official inflation – in 2024 went from 4.89% to 4.91%.
The estimate is above the ceiling of the inflation target that must be pursued by the BC. Defined by the National Monetary Council (CMN), the target is 3% for this year, with a tolerance range of 1.5 percentage points up or down. In other words, the lower limit is 1.5% and the upper limit is 4.5%.
The BC has also admitted exceeding the target in 2024 and stated that the chance of official inflation exceeding the target ceiling in 2025 is 50%.
For 2025, the market projection for inflation rose from 4.6% to 4.84%. For 2026 and 2027, forecasts are 4% and 3.8%, respectively.
In November, driven mainly by spending on food, the inflation in the country was 0.39%after the IPCA registered 0.56% in October. According to IBGE, in 12 months inflation accumulates 4.87%.
Interest rate
To achieve the inflation target, the Central Bank uses the basic interest rate as its main instrument, Selic, set at 12.25% per year by the Monetary Policy Committee (Copom).
The recent rise in the dollar and the uncertainties surrounding inflation and the global economy made the BC increase the pace of interest rate hikes at the last meeting of the year, on December 11th. The body informed that it will raise the Selic rate by one percentage point in the next two meetings, in January and March, if the scenarios are confirmed.
This was the third consecutive increase in the Selic and the increase consolidates a cycle of contraction in monetary policy. The rate returned to the level of December last year, when it was 12.25% per year.
After spending a year at 13.75% per year – between August 2022 and August 2023 – the rate had six cuts of 0.5 points and a cut of 0.25 points between August of last year and May of this year. At the June and July meetings, the Copom decided to maintain the rate at 10.5% per year, starting to increase the Selic at the September meeting, when the rate rose 0.25 points, and November, when it rose 0.5 points.
By the end of 2025, the estimate is that the basic rate will rise to 14.75% per year. For 2026 and 2027, the forecast is that it will be reduced to 11.75% per year and 10% per year, respectively.
When the Copom increases the basic interest rate, the purpose is to contain heated demand, and this has an impact on prices because higher interest rates make credit more expensive and encourage savings. But, in addition to Selic, banks consider other factors when defining the interest charged to consumers, such as risk of default, profit and administrative expenses. Therefore, higher rates can also make it difficult for the economy to expand.
When the Selic rate is reduced, the tendency is for credit to become cheaper, encouraging production and consumption, reducing control over inflation and stimulating economic activity.
