1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 97
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
BRAZIL
Juan Manuel Herrera Betancourt
Senior Economist, Investment Strategy
Latest
2025f
2026f
2027f
GDP Growth
1.8%
2.2%
1.8%
1.9%
Inflation
4.5%
4.5%
4.2%
3.8%
Unemployment
5.3%
5.6%
6.3%
6.8%
Budget Bal.
-8.5%
-8.5%
-8.2%
-7.7%
Latest
2025
1-yr fwd
2-yr fwd
2-yr yield
13.3%
13.3%
12.9%
13.5%
10-yr yield
13.7%
13.7%
12.4%
12.4%
Yield curve slope
0.5%
0.5%
-0.5%
-1.1%
Source: Bloomberg Finance LP, Scotiabank Economics, Scotia Wealth Management. "Latest" values are as at December 31, 2025 and, for data other than bond
yields, pertain to the most recent monthly, quarterly, or annual reading available on this date. GDP, inflation, and unemployment forecasts are based on Scotiabank
Economics forecasts dated December 11, 2025. Budget balance forecast is based on median consensus estimate compiled by Bloomberg | 2025 inflation and
unemployment are based on the average YoY rates for each month of the year. | 2025 yields are as at December 31, 2025. Forward periods are relative to December
31, 2025 and are based on forward market pricing.
Key conclusions
•
LatAm’s largest economy is in for a pivotal year. On the economic front, the BCB’s highly
restrictive policy stance is having a pronounced impact on GDP and inflation, which will
soon require looser settings, though growth is still expected to be below 2% over the
forecast horizon.
•
With the start of a new policy cycle also comes a wide range of expectations for how
fast policymakers may shift rates, as well as an equally wide range of expectations for
financial market performance and economic growth.
•
Beyond the uncertain BCB path, the outlook is clouded by the October 2026
presidential election, where incumbent Luiz Inácio Lula da Silva will face off against an
as-yet-undetermined right-wing candidate – each side with sharply different
approaches to public policy and private-sector relations.
LatAm’s largest economy is in for a pivotal year. On the economic front, the BCB’s highly
restrictive policy stance is having a pronounced impact on GDP and inflation, which will soon
require looser settings, though growth is still expected to be below 2% over the forecast
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