Itaú Unibanco Flags Downside Risk for Brazil’s 2025 GDP Amid Global Strains
Itaú Unibanco, Brazil’s largest private bank, now signals that international economic tensions have changed the outlook for Brazil’s economy in 2025.
The bank maintains a 2.2% growth forecast for Brazil’s GDP, but warns that actual growth could fall short. Brazil’s economy showed resilience in early 2025, with GDP rising 3.1% year-on-year in the first quarter.
Strong results in agriculture led this growth, and all sectors posted gains. Yet, Itaú’s economists expect this pace to slow in the second half of the year. They point to weaker global demand, lower prices for key exports, and tighter financial conditions as the main reasons.
Brazil’s direct exposure to new tariffs remains limited due to its relatively closed economy. However, the indirect effects—especially falling commodity prices and reduced global demand—pose a greater challenge.
Itaú now projects a trade surplus of USD 76 billion for 2025, with the current account deficit widening to 2.4% of GDP. Commodity prices have dropped sharply. Brent oil futures fell by 11.6% since early April, hitting their lowest levels since 2021.
Metal and agricultural prices also declined, leading Itaú to lower its inflation forecast to 5.5% for 2025. At the same time, food prices may rise if agricultural exports, especially soybeans, continue to climb.
China remains the top buyer, taking in 77% of Brazil’s soy exports. Brazil shipped 26.6 million tons in the first quarter of 2025, a 4% increase from last year. Fiscal challenges persist. Itaú expects a primary deficit of 0.8% of GDP in 2025, reflecting slow revenue growth and higher spending.
The government faces pressure to cut costs, but election-year politics could complicate these decisions. The central bank has kept interest rates high, with the benchmark rate at 15.25%, to contain inflation and stabilize the currency, which has hovered around 5.75 reais per dollar.
Debt markets remain active, but equity activity lags due to high rates and fiscal uncertainty. Investors watch for signs of fiscal discipline, which could support a gradual recovery in investment.
The real story is that Brazil’s economy faces mounting external and internal risks, with international economic tensions amplifying vulnerabilities and making the 2025 outlook more uncertain than headline figures suggest.
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