Brazil's economic activity, as measured by the central bank's IBC-Br index, expanded 2.5% in 2025, the central bank reported on Thursday. The pace represents a slowdown from the previous year but again exceeded early expectations, driven in large part by an unusually strong agricultural season.
The IBC-Br, widely regarded as a proxy for gross domestic product, aggregates estimates for agriculture, industry and services and incorporates production-related taxes. The indicator's 2025 outturn was bolstered by a 13.1% surge in agriculture; when that increase is excluded, the index would have risen 1.8% for the year on a non-seasonally adjusted basis.
Official GDP data are scheduled for release on March 3. Economists who participate in the central bank's weekly survey now project headline GDP growth of 2.3% for 2025, down from 3.4% recorded the prior year. At the start of 2025, those same economists had forecast a more modest 2.0% increase.
Monetary policy over the past year has been unusually tight. The central bank paused a significant tightening campaign in July after raising the benchmark Selic rate by a cumulative 450 basis points. The Selic remains unchanged at 15%, its highest level in nearly two decades, and policymakers have indicated an easing cycle is expected to begin next month.
Activity trends and near-term readings
Activity concluded 2025 on a subdued note, a trend highlighted by some analysts as reinforcing the rationale for forthcoming policy easing. "Activity ended 2025 on a soft note, reinforcing the case for easing ahead," Andres Abadia, chief LatAm economist at Pantheon Macroeconomics, said in a note to clients, adding that activity was stabilizing at low levels after a mid-year deceleration across sectors.
Monthly data showed the IBC-Br fell 0.2% in December on a seasonally adjusted basis compared with November. That decline was smaller than the 0.5% monthly fall that economists polled had expected. Looking at the fourth quarter, the index rose 0.4% from the prior three months, with gains recorded across services and agriculture while industry was the lone sector with a negative reading.
The central bank's index and the upcoming official GDP release will remain focal points for markets and policymakers as they assess the balance between growth momentum and the high interest rate backdrop intended to contain inflationary pressures.
Key points
- IBC-Br growth of 2.5% in 2025, aided by a 13.1% surge in agriculture.
- Excluding agriculture, the index would have risen 1.8% for the year; official GDP figures are due March 3.
- Monetary policy remains tight with the Selic at 15% after a 450 basis-point tightening; policymakers have flagged easing to start next month.
Risks and uncertainties
- Reliance on an outsized agricultural rebound - a potential vulnerability for growth if farm output moderates, affecting agricultural and related sectors.
- Industry weakness highlighted by a negative reading in Q4 may signal uneven recovery across sectors, impacting manufacturing and industrial markets.
- High policy rates intended to curb inflation could continue to restrain demand, leaving growth sensitive to monetary policy adjustments.