Brazil – The shadow of fiscal imbalance looms over a fast-growing economy
- 21.01.2025
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In summary
While Brazil's growth performance has been quite remarkable, its success has been overshadowed by persistent fiscal concerns. At a time when the currency is already weakened by an unfavorable international context, fiscal uncertainty is accentuating the depreciation of the Brazilian real (BRL/USD), which in turn is tending to reinforce the inflationary pressures seen since May.
The combination of high interest rates and rising expenditure is raising concerns about the trajectory of public debt, despite sustained economic growth. Recent developments have been rather disappointing: the trend towards debt reduction observed in 2021-2022 has been reversed; the new fiscal anchor appears to be ineffective, or its credibility has already been tarnished.
Catherine LEBOUGRE, Economiste