The Institute for Applied Economic Research (Ipea) revised the growth projection for the Brazilian Gross Domestic Product (GDP) from 3.3% to 3.5% in 2024. For 2025, the estimate was maintained at 2.4%.
The GDP projection for next year remained unchanged due to the levels of uncertainty in the forecasts, which are quite high at the moment. “The expectation that the economy will end the year with growth higher than previously expected may offset the worsening seen in the balance of risks”, says Ipea.
From a production perspective, the institute predicts an increase of 0.5% for the services sector, in a seasonally adjusted comparison, with growth of 3.6% year-on-year. Even with the moderate pace, Ipea expects services to continue as one of the main drivers of GDP growth, accumulating increases of 3.7% and 2.4% for 2024 and 2025, respectively.
The forecast for the industry is an increase of 0.3%, with an increase of 2.6% in relation to the fourth quarter of 2023. Industrial GDP is expected to register an expansion of 3.3% in 2024, in a context of adjusted inventories and with the level of utilization of installed capacity operating above its historical average. Under the effect of the interest rate increase cycle that began in September, Ipea estimates a more modest performance in 2025, with accumulated growth of 2.3%.
In relation to agricultural production, based on projections for crop results in 2024, released by the Systematic Survey of Agricultural Production, from the Brazilian Institute of Geography and Statistics (IBGE), the Ipea models point to a drop of 2.6% of agricultural GDP in the year to date and a projected growth of 2.5% for 2025.
On the expenditure side, Ipea predicts good performance in gross fixed capital formation (GFCF) in the fourth quarter of 2024, with growth of 0.8% in the seasonally adjusted series, a result compatible with the increase of 9.8% year-on-year. For 2024 and 2025, Ipea estimates increases of 7.4% and 3.6%, respectively.
The consumption of goods and services should continue to grow, although with less space in family budgets, due to a less favorable inflation scenario, expectations of less fiscal impulse and more expensive credit due to the contractionary monetary policy, says Ipea. As a result, consumption growth is projected to be 0.2% seasonally adjusted and 5.1% over the same quarter in 2023.
For 2024, after a performance that exceeded researchers’ expectations, Ipea revised the accumulated result to 5.1%. However, with an interest rate projected for the end of 2025 higher than previously estimated, the consumption of goods and services tends to slow down, increasing just 2.6% in 2025.
Government consumption is expected to grow 0.9%, with an increase of 1.5% year-on-year in the fourth quarter. Year-to-date, Ipea predicts increases of 2% and 2.2% for 2024 and 2025, respectively.
A positive contribution from net exports is also expected in the fourth quarter, with increases of 0.9% for exports and 1% for imports. Compared to the same period in 2023, the contribution will remain negative, with exports growing 4%, against a 17.1% increase in imports.
“In the year to date, in 2024 and 2025, assuming an external scenario without major disruptions, exports would grow at rates of 4.1% and 3.4%, while imports would record expansion of 15.0% and 4.4% , in that same order”, says Ipea.
Interest and exchange rate
As for monetary policy, Ipea estimates that the tightening cycle that began in September – which already brought the Selic rate target from 10.50% to 12.25% per year (aa) – will continue throughout the first half of 2025, leading the rate to reach a level of around 14.25% per year.
By the end of 2025, however, it is assumed that the cooling of inflationary pressures and the stabilization of inflation expectations, in a context of reducing the interest differential in relation to the USA and controlling the perception of fiscal risk by market agents, will allow us to begin a cycle of reducing the Selic rate, which should end the year at around 13.25%.
In the external area, the maintenance of a reasonable growth rate in demand in China should contribute to the relative stability of commodity prices, while the expected increase in import tariffs in the USA, combined with the possible tax reduction in the country, should offset the effects of the easing of monetary policy and result in a certain appreciation of the dollar. Given these hypotheses, the scenario projected by Ipea is a certain appreciation of the real/dollar exchange rate over the projection horizon.
