Brazil Faces Recession in 2025, JPMorgan Analysts Forecast

JPMorgan forecasts a shallow recession for Brazil in the second half of 2025, citing worsening global conditions and domestic vulnerabilities.

The bank revised Brazil’s GDP growth estimates downward to 1.9% for 2025 and 1.2% for 2026, reflecting reduced optimism compared to earlier projections of 2.2% and 1.5%.

This adjustment underscores the challenges posed by tighter monetary policies, fiscal constraints, and external shocks. Brazil’s Central Bank is expected to conclude its interest rate hikes in May, with cuts beginning in November to ease economic pressures.

Analysts anticipate the Selic rate will drop to 9.75% by the end of 2025, aiming to balance inflation control and economic growth. However, fiscal space remains limited, as the government projects a deficit of -0.8% of GDP for this year.

This is primarily due to weaker commodity prices and reduced export revenues. Global trade tensions, particularly U.S.-imposed tariffs, add complexity to Brazil’s outlook.

While direct impacts on GDP are estimated at only 0.3%, secondary effects could reshape Brazil’s agricultural exports as they replace U.S. products in key markets like China.

This shift may partially offset declining commodity prices but won’t fully counterbalance broader economic challenges. A potential global recession—estimated at a 60% probability—could further strain Brazil’s economy.

JPMorgan warns that slowing U.S. growth will ripple through emerging markets, amplifying financial instability and reducing investor confidence. Brazil’s reliance on agriculture as a growth driver may provide some relief but highlights its vulnerability to external shocks.

The economic landscape ahead demands careful navigation as Brazil contends with fiscal adjustments, inflationary pressures, and volatile global markets. While resilient in past crises, Brazil faces mounting hurdles that require strategic policy responses to sustain stability and growth amid uncertainty.

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