IMF Cuts Brazil Growth Forecast to 2.2% From 2.4%

The International Monetary Fund (IMF) lowered its forecast for Brazil's economic growth in 2026 to 2.2% from the previous 2.4%, and for 2027 to 1.9% from 2.2%. This puts Brazil, the largest economy in Latin America, just below the 2.3% growth projected by the IMF for the United States. The IMF, a Washington-based institution, provides loans to governments experiencing financial difficulties and monitors their economies.

It releases its World Economic Outlook twice a year. The October edition was published as finance ministers met in Bangkok, Thailand, for the IMF and World Bank annual meetings. The lower forecasts are attributed to three factors: high interest rates aimed at inflation, reduced budget support, and global uncertainty. Brazil's central bank, Banco Central do Brasil, has kept the benchmark Selic interest rate at 13.75% after reducing it from 14% in mid-September.

High interest rates make credit expensive, potentially slowing down spending by households and investments by companies. Less budget support means public spending will contribute less to growth than before. The IMF kept its US growth forecast at 2.3% for 2026 and noted that Latin America and the Caribbean, as a whole, should grow by 2.3% in 2026 and 2.5% in 2027.

For the world economy, the IMF raised its 2026 forecast to 3.1% from 3% and kept it at 3.4% for 2027. China, Brazil's largest trading partner, is expected to grow by 4.5% in 2026, down from 4.6% in July. Brazil's high interest rates provide a good return for bond investors, but the IMF cites these rates as a major reason for the slowing growth.

Brazil is set to hold a presidential runoff on October 25, and the new government will take office in January, facing the projected slower growth.