Key facts
- Brazil's government lowered its 2026 economic growth forecast to 2.0% from 2.3%.
- The 2025 growth forecast was revised down to 2.3% from 2.5%.
- Weaker services and industrial output are cited as reasons for the revision.
- Household debt service reached a historic high in the second quarter, limiting consumption.
- Inflation forecasts for 2026 were also revised down to 4.9% from 5.1%.
Brazil's government has reduced its economic growth forecast for 2026 to 2.0% from 2.3%, attributing the revision to weaker performance in the services and industrial sectors. The Economic Policy Secretariat of the Finance Ministry also lowered its projection for 2025 growth to 2.3% from 2.5%.
The government's Boletim Macrofiscal, released on Tuesday, September 22, indicates that the services sector forecast fell from 2.4% to 1.8%, and the industry forecast from 2.1% to 1.7%. These downward revisions were partially offset by an improved outlook for agriculture, revised from 1.8% to 2.8%.
According to the ministry, the revision in services is due to a weaker carry-over from the first half of the year and the lagged impact of monetary policy on domestic demand. Furthermore, household debt service has reached its highest level in the historical series in the second quarter, which is limiting the conversion of income growth into consumption.
The industrial sector is being pressured by the cost of credit and weaker demand for consumer goods, although extractive activity continues to support the sector. On the other hand, the labor market is supporting consumption-linked segments, and an expansion in the income tax exemption bracket is expected to boost disposable income in the second half of the year.
Inflation forecasts for 2026 were also revised downward to 4.9% from 5.1%. This revision incorporates recent inflation data, improved inflation expectations, and the expectation that the Selic interest rate will remain at a contractionary level throughout the year. Factors such as the El Niño phenomenon are considered potential inflationary pressures, though recent fuel tax exemptions are not yet fully factored in.