On 30 August 2024, the Federal Government of Brazil submitted its draft budget proposal for the fiscal year (FY) 2025 to the National Congress.
The 2025 budget bill offers updated projections for GDP growth, inflation, and other economic indicators for the upcoming year as outlined in the Budget Guidelines Law.
The 2025 budget plan is based on a GDP growth forecast of 2.64% with a zero deficit for the upcoming year. Government news outlets have lauded this year’s budget balance and the proposed 6.87% increase in the minimum monthly wage.
However, some market analysts expressed concern that the government’s proposed wage hike may hurt spending on social security and pensions. This concern is based on the fact that social security expenditure projections will not be underestimated in the 2025 budget bill.
Regarding inflation, the country’s official inflation rate has been increased from 3.1% to 3.3% for next year, according to the Broad National Consumer Price Index (IPCA). The inflation rate exceeds the 3% threshold the National Monetary Council established. As of July 2024, the IPCA reported an inflation rate of 4.5% over the previous 12 months, which surpassed the targeted estimate.
Additionally, the 2025 budget introduces the Selic Rate (the economy’s basic interest rate), which will be set at 9.61% by the end of 2025 from the projected 8.05% under the Budget Guidelines Law.
