Brazil trims GDP outlook, sees slower recovery amid cautious monetary easing cycle
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FILE PHOTO: Cityscape from the Terraco Italia restaurant in Sao Paulo, Brazil, July 28, 2026. Image shot through a glass window. REUTERS/Alexandre Meneghini/File Photo
BRASILIA, Sept 22 (Reuters) - Brazil's government on Tuesday lowered its economic growth forecast for 2026 to 2.0% from the 2.3% projected in July, saying a stronger outlook for the agricultural sector would not offset expectations for weaker services and industrial output.
The Economic Policy Secretariat of the Finance Ministry also revised down its forecast for next year, projecting gross domestic product to rise 2.3% instead of the previously estimated 2.5%.
It said the 2027 downward revision reflects a more gradual monetary easing cycle embedded in its baseline scenario, which shifts part of the economic recovery into later years.
The ministry projects GDP growth averaging 2.6% between 2028 and 2030.
Brazil's central bank began a cautious easing cycle in March and has since cut its key interest rate by a cumulative 125 basis points to 13.75%.
Real rates, however, remain among the highest in the world as policymakers seek to bring annual inflation, currently running at about 4.2%, back to the official 3% target.
The government also lowered on Tuesday its 2026 inflation forecast to 4.9% from the previous 5.1%, while raising its projection for next year to 3.8% from 3.6%, citing the impact of a stronger El Nino weather pattern on next year's harvest.
The updated forecasts will serve as the basis for the government's estimates of annual revenue and spending in a report due later this week.
Despite the downgrades, the government's growth projections remain more optimistic than market estimates.
Economists surveyed weekly by the central bank expect GDP to expand by just under 1.9% this year before slowing to slightly more than 1.4% next year, according to the latest poll of more than 100 economists.
(Reporting by Marcela Ayres; Editing by Fernando Cardoso and Paul Simao)
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