Brazil in 2025: Economic Slowdown, Political Tensions, and Environmental Progress

Economic Challenges and Political Landscape

Brazil’s economy has shown clear signs of slowdown since early 2025, with the central bank’s economic activity index showing a 0.8% contraction between April and June. Annual GDP growth is expected to decelerate from 3.5% in 2024 to 2% this year, with possible negative quarterly growth rates in late 2025.

The fundamental issue stems from unsustainable fiscal policies, with public debt-to-GDP ratio reaching 78%, marking a concerning 4.4 percentage point increase in just 12 months. While inflation is projected to reach 5.2% by the end of 2025, there is potential for stronger growth through household consumption, particularly given the current tight labor market.

Political Tensions and International Relations

The country is currently experiencing significant political tension, with thousands of Brazilians protesting as former president Jair Bolsonaro faces trial for an alleged attempted coup. The situation has gained international attention, particularly with US President Donald Trump declaring Bolsonaro’s ‘persecution’ a threat to US national security.

Environmental and Social Initiatives

The current government has introduced ambitious development programs focusing on combating hunger and inequality, promoting social justice, reindustrializing Brazil, and embracing a greener economy. They have committed to achieving zero illegal deforestation by 2030 and launched an Ecological Transformation Plan (ETP).

Future Outlook and Reforms

Recent indirect tax reform is expected to improve productivity, reduce compliance costs, and remove economic distortions. In the medium term, GDP is projected to converge to 2.3%, reflecting the impact of ongoing structural reforms. While there are potential upside risks from faster implementation of productivity-enhancing reforms and the Ecological Transformation Plan, downside risks include a slowdown in major economies amid global trade tensions and policy uncertainty.

Given its low-carbon energy matrix, Brazil has the potential to reduce carbon emissions in transport, industry, and cities at a relatively low cost of about 0.5% of GDP annually until 2050, positioning the country advantageously in the future green economy.