Losing steam

BRAZIL ECONOMICS - Report 17 Nov 2025 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

Economic activity lost strength starting in the second quarter and now shows signs cooling aggregate demand. Retail sales indicate that the payment of court-ordered debts (precatórios) was not enough to sustain a favorable outcome for consumption. Even segments more sensitive to income have shown weak performance, despite the firm behavior of labor income. In investment, apparent consumption metrics point to a decline in gross fixed capital formation in the third quarter, even when considering the positive impact of the import of an oil platform. These elements led us to revise our 2025 growth forecast to 2.1%. The recent slowdown, on the other hand, tends to increase incentives for the government to expand demand-stimulus measures as the electoral period approaches.

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