Economists see a growing risk of recession in Brazil in 2027
Ibre-FGV, banks and consultancies project GDP growth of around 1% next year and do not rule out a contraction, amid high interest rates and indebted households.
Translated from the Portuguese original by the Panorama newsroom. Read in Portuguese
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The possibility of the Brazilian economy entering a recession in 2027 has gained ground in economists' projections, Folha de S.Paulo reported. Estimates from Ibre-FGV (the Brazilian Institute of Economics of the Getulio Vargas Foundation), banks and consultancies point to GDP (Gross Domestic Product) growth of around 1% next year, without ruling out a contraction.
A preliminary exercise by Ibre-FGV indicates that, if the deterioration in financial conditions persists, with rising interest rates and a stronger dollar, cyclical activities (retail, manufacturing and services) would shrink 0.5% in 2027. Even assuming 1% growth in agriculture and the extractive industry, GDP would stagnate in that scenario.
Other institutions are already openly mentioning the risk. Fecomercio-SP, the São Paulo commerce federation, forecasts a recession, citing the exhaustion of a growth model based on debt. Itaú cut its 2027 growth estimate from 1.2% to 0.5%, and Safra believes the market sees a higher risk of contraction.
According to the report, agriculture and the extractive industry, which accounted for about a third of the increase in the economy's value added between 2023 and 2025, are expected to contribute much less in 2027. At the same time, Ibre's financial conditions indicator reached restrictive territory, with real interest rates between 9.5% and 9.7% a year. President Lula's indecision over how to tackle the fiscal crisis, which orthodox economists see as the root of high interest rates, worsened the picture after the runoff.
Household debt is another source of pressure: credit bureau Serasa counted 84.2 million people in default in September, 51.1% of the adult population, a record for the series. For Silvia Matos, coordinator of Ibre's Macro Bulletin, without a credible fiscal adjustment the risk of a credit crisis grows. The projections cited by Folha also indicate that unemployment, estimated at 5.6% for 2026, could rise to nearly 7% in 2027.