Brazil is home to 205.3 million people, with a real GDP per capita of $10,616 in 2024. It is a large federal country, comprising the Union (federal government), 26 states (plus the Federal District), and over 5,500 municipalities. Despite its diversity, systemic racial and gender discrimination continue to limit opportunities for individuals and families to break the intergenerational cycle of poverty.
Brazilians inhabit a vast landmass of 8.5 million km虏鈥攁pproximately the size of the continental United States鈥攁cross varied ecosystems and with sharp differences in race, history, and culture. The country鈥檚 Human Capital Index (HCI) indicates that children born today will achieve only 55% of their potential productivity if they had full access to quality health and education. Factoring in adult unemployment, productivity drops to 33%, meaning 67% of Brazil鈥檚 talent is lost.
Afro-Brazilians and indigenous peoples have less access to quality schools and health services than whites, and women face workplace discrimination that limits their earning potential. Even before the COVID-19 pandemic, some regions鈥攕uch as the North and Northeast鈥攈ad HCI levels around 40%, similar to Sub-Saharan Africa, while wealthier areas like the Southeast reached indices near 70%, comparable to OECD countries.
Brazil鈥檚 economic growth has been resilient, averaging above 3% over the past three years. Strong private consumption, fueled by social transfers, drove demand, while growth in services and agriculture supported supply. The expanding labor market helped reduce poverty and inequality.
To sustain growth amid demographic changes, Brazil needs further structural reforms to boost productivity, especially outside agriculture; improve the business environment; promote innovation and trade openness; strengthen educational outcomes; increase savings and infrastructure investment; and enhance resilience to climate change, particularly in the Amazon. The recent indirect tax reform is expected to improve productivity, reduce compliance costs, simplify the tax system, and eliminate economic distortions. However, aging-related challenges, especially in health and pensions, are projected to pressure public finances.
In 2024, Brazil鈥檚 real GDP grew by 3.4%, driven by robust consumption, a strong labor market, fiscal transfers, and recovering investments. Growth is expected to moderate to 2.2% in 2025 due to higher interest rates and an adverse external environment, with household consumption slowing as debt rises, transfers decrease, and labor market gains diminish. Medium-term GDP growth is projected to converge to 2.3%, reflecting the impact of ongoing reforms.
Inflation is expected to gradually converge to 4.2% by 2027, within the Central Bank鈥檚 target, as monetary tightening anchors price expectations and supports moderate growth.
The current account deficit rose to 2.8% of GDP, driven by higher imports of goods and services, mainly financed by net foreign direct investment (2.1% of GDP). The Real depreciated by 27.9%, reaching R$6.19/US$1 at the end of 2024, reflecting external changes and fiscal uncertainty. Reserves remained at 15% of GDP, covering 14 months of imports.
Poverty, measured at the $6.85 per capita per day line, fell from 21.7% in 2023 to 20.9% in 2024, thanks to a strong labor market. 2.8 million jobs were created, with unemployment at a record low of 6.2% and rising labor force participation. Average real wages increased by 4.8%, outpacing the 3% rise in the minimum wage. However, further poverty reduction is expected to be slow due to limited fiscal space for social spending and slower growth in the services sector, where 80% of the poor are employed.
The general government primary fiscal deficit decreased from 2.3% in 2023 to 0.3% of GDP in 2024, driven by strong revenue growth and reduced expenditures, particularly one-off judicial payments (鈥減recat贸rios,鈥 0.9% of GDP in 2023). General Government Gross Debt increased from 73.8% to 76.5% of GDP in 2024 due to higher interest payments.
Efforts to contain expenditure growth and increase fiscal revenues are expected to improve the primary deficit from 0.1% of GDP in 2025 to a surplus of 0.3% by 2027. Public debt is projected to reach 79.6% of GDP by 2028, driven by high short-term interest costs, highlighting the need for further fiscal efforts. Thereafter, debt is expected to decline slowly, supported by primary surpluses, continued GDP growth, and lower domestic interest rates.
Despite these improvements, fiscal sustainability remains a challenge. Budget rigidity and indexed expenditure growth undermine public spending efficiency and erode fiscal space for investments.
With high and rising debt relative to GDP, and sensitivity to economic shocks, a primary fiscal adjustment of 3% of GDP is needed to reverse the debt trajectory and rebuild buffers. Controlling age-related spending, especially pensions, through reforms such as minimum wage indexation is essential for meeting fiscal rules and targets and improving policy credibility. A proposed income tax reform to broaden the tax base and increase progressivity would further support fiscal sustainability.
Brazil鈥檚 macroeconomic buffers remain solid, with ample international reserves, low external debt, a reliable and independent Central Bank, a resilient financial system, and exchange rate flexibility.
Overall, Brazil can no longer rely on commodity booms or expanding land and labor inputs to achieve high-income status. The country must shift to a low-carbon, productivity-led growth model, driven by high-quality education and modern infrastructure鈥攊ncluding digital鈥攖o create more and better jobs. Brazil could become a global innovation hub through increased competition, trade openness, and integration with regional and global value chains.
A more conducive business environment would attract greater private investment in industry and climate transition. Despite progress in the financial system, further efficiency gains are needed. Brazil could empower its entire workforce, especially by removing systemic barriers that limit capital accumulation and employment opportunities for Afro-Brazilians, indigenous peoples, women, and youth.
Brazil鈥檚 natural resources position it well to seize new growth opportunities as the world shifts to low-carbon sectors and markets. Since three-quarters of Brazil鈥檚 greenhouse gas emissions stem from land-use changes and agriculture, halting deforestation and transitioning to low-carbon agriculture are priorities.
The Amazon Rainforest is nearing a tipping point, beyond which it may not generate enough rainfall to sustain its ecosystem, agriculture, hydropower, water supply, and industries, nor provide vital environmental services globally. Efforts to halt Amazon deforestation must not lead to increased deforestation in other biomes, such as the Cerrado, which are also crucial.
The agricultural sector can curb deforestation, expand climate-impactful land use, and further increase productivity. With its low-carbon energy matrix, Brazil can reduce emissions from transport, industry, and cities at a low net cost鈥攁bout 0.5% of GDP per year until 2050鈥攑ositioning itself well for integration into the future green economy.
Significant progress is within reach, but time is short. The current government has brought renewed political will, a strong reform agenda, and ambitious development programs to combat hunger and inequality, promote social justice, reindustrialize Brazil, and embrace a greener economy. It is committed to achieving zero illegal deforestation by 2030 and has launched an ambitious Ecological Transformation Plan (ETP) to promote inclusive and sustainable development while combating climate change. The ETP aims to increase productivity and generate well-paid green jobs, reduce the economy鈥檚 environmental footprint, and promote equitable development through better income and benefit distribution.
Sustained efforts and strong commitment from key actors, including the private sector, are required鈥攖ranscending political divisions and electoral cycles. If successful, current programs, policies, and reforms will strengthen Brazil鈥檚 productive structure and technological innovation in the short term, while laying stronger foundations for the long term.
Last Updated: Oct 15, 2025