In the Heat of the Night

BRAZIL ECONOMICS - Forecast 16 Sep 2024 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

Output should grow 3% in 2024, driven by domestic demand, while net imports continue to expand to accommodate the gap relative to GDP. In 2025, activity should slow down to 2%, close to its potential pace. Thus, the labor market will remain tight, with unemployment continuing to decline, while the output gap remains positive.

We expect inflation to reach 4% next year, assuming a mild monetary tightening cycle, which should bring the Selic rate to 11.75% by early 2025. On the fiscal side, difficulties in meeting primary targets persist (a projected deficit of 0.7% of GDP in 2024 and 0.9% in 2025). Regarding external accounts, we expect a smaller trade surplus this year (US$ 66 billion) and the next (US$ 61 billion).

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