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Moderate Growth Expectations Amid Internal and External Uncertainties
The Brazilian economy showed clear signs of slowing down in the second quarter of 2025.
After a strong start to the year driven by a bumper crop and high family consumption, the scenario has changed.
Now, projections indicate more timid growth. This movement is held back by tightening credit conditions and the prolonged effects of monetary policy.
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The Brazilian Institute of Geography and Statistics (IBGE) will release the official Gross Domestic Product (GDP) data next Tuesday.
Agriculture and Industry Lose Strength With High Interest Rates
In the first quarter of 2025, GDP grew by 1.4% compared to the last quarter of 2024.
The result was driven by agriculture and investments above expectations.
However, in the second quarter, the agricultural sector experienced a slight contraction. This movement occurred due to the high comparison base from the previous record harvest.
At the same time, the manufacturing industry felt the impact of high interest rates more intensely. The base interest rate was set at 15% per year.
According to economist Luís Otávio Leal from G5 Partners, rising interest rates directly impacted credit and increased delinquency.
This scenario restricted industrial production capacity. Even though the extractive industry showed some growth, it was not enough to offset the decline.
Services Maintain Resilience and Sustain Activity
While agriculture and industry lost momentum, services kept the economy on positive ground.
The information and communication sector continues to expand. Business digitalization and advances in artificial intelligence are driving this movement.
Meanwhile, household services remain buoyant, supported by a still strong labor market and available income.
As Rodolfo Margato, an economist at XP, highlighted, the labor market remains one of the key supporting factors.
This scenario ensures expansion in income-sensitive areas. It also shields economic activity against a larger contraction.
Outlook for the Coming Quarters
For the third quarter of 2025, forecasts are more optimistic.
The payment of court-ordered debts is expected to boost family consumption, alongside the resumption of private payroll loans.
The use of FGTS as collateral will drive this movement.
Additionally, agriculture is expected to regain strength, especially with the upcoming corn harvest.
Economists like Leal project growth of 0.7% in the third quarter.
On the other hand, the fourth quarter is likely to be more challenging.
With the withdrawal of specific stimulus measures and the continued effects of restrictive monetary policy, stagnation is expected.
The variation may be close to zero.
External Uncertainties and Risks from U.S. Tariffs
Beyond internal factors, there is also significant concern about external impacts. As a result, analysts are closely monitoring developments in the international scenario.
The tariffs imposed in August 2025 by the U.S. president have not yet been fully quantified in their effects. Nevertheless, they are already causing instability among investors and economic agents.
In light of this, the sense of uncertainty is growing in productive sectors. Although the impacts are uncertain, the climate of caution is spreading throughout the market.
Economist Juliana Trece from Ibre/FGV warned that this tense environment may hinder new investments. Moreover, industrial and exporting sectors face elevated risks.
According to her, Gross Domestic Product (GDP) is expected to grow by only 0.5% in the second quarter. For the year as a whole, expansion is forecasted to reach 2%.
Therefore, while the Brazilian economy continues to grow, the intensity of the expansion is lower compared to previous years. For this reason, optimism has been replaced by caution.
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