Brazil economists expect weaker real, higher interest rates in 2025

SAO PAULO (ICIS)–Brazilian economists surveyed by the central bank do not expect the depreciation in the real in past weeks to stay for much of 2025, with interest rates consequently expected at nearly 15%.

In its last weekly survey among economists in 2024, the Banco Central do Brasil (BCB) said on Monday inflation expectations have also jumped considerably for 2025, with the annual rate now expected at nearly 5%.

GDP growth, on the other hand, is expected to slow considerably.

Brazil’s annual rate of inflation has been on the rise for months, reaching 4.87% in November. The central bank swiftly reversed its monetary policy easing, bringing the main interest rate benchmark, the Selic, up to 12.25%, and signaled it is to tighten further in 2025.

In fact, some economists have said GDP quarterly growth could even turn negative towards the second half of 2025 after the economy overheated in 2024.

The Brazilian real (R) has been the emerging markets currency which has depreciated the most in 2024 – it started the year trading at less than $1:R5.00, but as of Monday morning it was trading at $1:R6.18.

Most economists expect the currency to recover slightly in 2025, but to stay at depreciated levels.

A depreciated real feeds into inflation as it makes dollar-denominated imports more expensive. Higher inflation meanwhile prompts central banks to hike rates to slow price rises by cooling down borrowing.

That, in turn, can slow down consumption of petrochemicals-intensive higher priced durable goods, as consumers shy away from purchasing under a high borrowing costs environment.

BCB Focus Market Readout	2024	2025
Inflation (in %)	4.90	4.96
GDP (in %)	3.49	2.01
Exchange rate ($:R)	6.05	5.96
Interest rates (in %)	N/A	14.75

Brazil’s central bank weekly economic survey compiles answers of more than 100 economists and analysts.

Meanwhile, the country’s largest financial daily Valor also published on Monday the results of its own survey among 76 analysts, with GDP expectations in line with those published by the central bank.

They expect GDP growth of 2% in 2025, but the forecasts vary between 1.3% and 3%, showing wider uncertainty about next year’s outlook.

Some analysts surveyed did not rule out a technical recession – two quarters with negative growth – towards the second half of 2025.

“The unemployment rate is low, and the agricultural sector should be very strong. But the end point, at the end of next year, could be bad. The activity has been more resilient, but I believe that, in 2025, it will be much more difficult to achieve growth close to 3%, as we have seen in recent years,” said Cesar Garritano, chief economist at Somma Investimentos.

“In quarterly variations, there is a lot of discussion about seasonal adjustment and, therefore, I prefer to compare the same periods year on year. But the estimates show that it is not possible to exclude the possibility of a technical recession.”