Brazil's Central Bank lowered its growth forecast for this year from 2% to 1.8% and issued its first estimate for 2027: an expansion of just 1.4%. The figures come from the bank's third-quarter Monetary Policy Report, released on Thursday (24). In practical terms, the country should produce, hire and hand out raises more slowly than in 2025, when GDP grew 2.3% according to IBGE, the national statistics agency.
To size up the slowdown: the gap between 2025's 2.3% and the 1.4% projected for 2027 is 0.9 of a percentage point. On a monthly salary of R$ 4,000 (roughly 775 dollars), that would come to about R$ 36. It is as if the whole economy were getting a slightly smaller raise each year.
Why the cut
The bank said this year's downgrade reflects early third-quarter indicators pointing to weaker activity and a "less favorable growth composition" in the second quarter. GDP came in slightly above expectations in the April-June period, but carried by sectors that depend little on household spending.
"Although the aggregate GDP result slightly exceeded expectations, the positive surprises were concentrated in segments less sensitive to the economic cycle, notably agriculture and extractive industry. The more cyclical supply sectors and household consumption, in turn, surprised in the opposite direction," the bank wrote.
In plain words, farming and mining held up the result, while household consumption fell short.
In brief: GDP (Gross Domestic Product) is the sum of all goods and services produced in the country, from the corner bakery to a phone app. The Monetary Policy Report is the quarterly document in which the Central Bank explains its interest rate decisions and publishes its official forecasts for growth and inflation.
High rates and fading stimulus in 2027
For 2027, the first year of the next presidential term, the bank expects "moderate expansion" and lists the brakes: interest rates held at "contractionary" levels, high enough to restrain consumption and investment; little idle capacity, with factories and services running close to their limit; an uncertain external scenario; and waning fiscal and credit impulses. It also expects a smaller contribution from agriculture and mining, the two sectors that powered this year's growth.
In this election year, the government tried to speed the economy up with subsidized credit lines for truck drivers, taxi drivers, small entrepreneurs, home renovation and debt renegotiation. The bank expects that push to fade next year.
The benchmark interest rate, the Selic, which shapes installment plans and savings returns, stands at 13.75% a year after five straight cuts, and remains among the world's highest in real terms, as g1 reported. The bank also does not expect inflation to return to the center of its 3% annual target before 2029, according to Folha de S.Paulo. On the horizon the bank watches when calibrating rates, the first quarter of 2028, its projection is 3.2%.
A clash with the 2027 budget
The bank's projections sit below the government's own math, and the gap costs money. The Finance Ministry expects 2.3% growth in 2027, a figure revised down this week, while the budget bill sent to Congress in late August assumes 2.46%, g1 reported. Market economists, polled in the weekly Focus survey run by the Central Bank and published on Monday (21), expect 1.43%, nearly in line with the monetary authority.
Lower GDP means lower tax revenue. The Independent Fiscal Institution (IFI), a Senate body that audits public accounts, projects a deficit of R$ 86.1 billion (about 16.7 billion dollars) for 2027, against a surplus of R$ 18.6 billion forecast by the economic team. To meet its fiscal target, the next administration will have to freeze spending at the start of the term, the IFI says.