Brazil has been showing high economic growth rates over the past few years. In 2021, the country's real GDP increased by 4.8% due to the low base effect, while in 2022 and 2023, growth was 3.0% and 3.2%, respectively, against the backdrop of increased agricultural and industrial production. At the same time, the key factor contributing to the development of the Brazilian economy today is sustained domestic demand, driven by rising incomes and a decline in unemployment from 13.2% in 2021 to 7.9% in 2023. According to IMF estimates, in 2024, the republic's real GDP increased by 3.7%, significantly exceeding initial forecasts.
The country continues to overcome poverty successfully: the share of Brazilian citizens living on less than US$6.85 per day (the poverty line set for upper-middle-income countries) fell from 28.4% in 2021 to 21.3% in 2024. Nevertheless, social inequality remains a pressing issue in the country: according to the latest World Bank data, Brazil's Gini coefficient was 0.520 in 2022. This indicator places the country among those with the highest levels of inequality, and over the past decade, the republic has failed to make significant progress in reducing it.
Despite Brazil's dynamic development in recent years, the national economy is expected to slow down in the medium term, primarily due to the tightening of monetary policy by the Central Bank of the Republic amid strong inflationary pressure. According to IMF forecasts, Brazil's real GDP growth in 2025–2026 will be 2.2%.
In 2017–2020, inflation in Brazil did not exceed 4%, but in 2021, due to disruptions in global supply chains, prices began to rise rapidly in the country. As a result, inflation in the republic reached 8.3% in 2021 and peaked at 9.3% in 2022. This situation forced the Central Bank of Brazil to raise its key rate to 13.75% (a total of 1,175 basis points from March 2021 to August 2022) and maintain it at that level until August 2023. In 2023, the pace of price growth slowed, and inflation stood at 4.6% at the end of the year, allowing the regulator to begin easing monetary policy (by May 2024, the key rate had been reduced by a total of 325 basis points to 10.5%).
However, since mid-2023, inflation has not shown the expected decline, remaining at the same level, while inflation expectations have begun to gradually increase. Currently, the price growth forecast by the Central Bank of the Republic does not correspond to its target range of 3.0±1.5% and is forcing the regulator to resume tightening monetary policy. Thus, from September 2024 to January 2025, the key rate was increased by a total of 275 basis points to 13.25%. The key inflationary factors in Brazil include unpredictable food price increases, economic overheating amid high domestic demand, and a significant weakening of the Brazilian real against the US dollar. In this regard, the inflation forecast may be revised upward in the medium term.
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