An economy on farm support
There were no surprises this time: GDP growth in the fourth quarter of last year reached 0.1%, slightly above the previous quarter (0.0%, revised from 0.1%), bringing growth in 2025 to 2.3%, compared to 3.4% in 2024.
Domestic demand, the main driver of aggregate demand expansion in 2024, showed an even more substantial slowdown: 1.7% compared to 4.7%, reflecting weaker growth in consumption (1.3% vs. 5.1%) and investment (2.9% vs. 6.9%), while government consumption maintained virtually the same pace, at 2.1%.
From the supply perspective, agriculture was the major highlight, expanding nearly 12% in the year and adding about R$ 73 billion to economic output (roughly 27% of the increase in value added at basic prices, VABP). Meanwhile, industrial and services GDP growth decelerated sharply, from 3.1% and 3.8% to 1.4% and 1.8%, respectively.
Put differently, there was a considerable loss of dynamism in the Brazilian economy last year, mitigated by the excellent performance of agriculture, whose expression, from the demand perspective, was the vigorous growth of exports, 6.2%. Indeed, measured at constant prices, exports increased by the equivalent of R$ 128 billion last year, surpassing the contributions from consumption, R$ 106 billion, and investment.
This pattern suggests that monetary policy had a strong negative impact on activity. Without the contribution of agriculture, growth would have been even lower, 1.8%, compared to 3.8% in 2024.
We understand, however, that the country’s sustainable growth capacity is low, probably below the expansion observed last year. Gross fixed capital formation, despite growing in 2025, remained around 17% of GDP, the same level recorded the previous year, and well below that observed in the 2010–2014 period (20.5% of GDP).
At the same time, productivity growth remains weak. Output per worker increased by only 0.5% in 2025 (0.6% in 2024), while output per hour worked grew even less, 0.4%. Combined with the demographic component, which increases the working-age population, this performance points to sustainable economic growth slightly above 1% per year.
This is consistent with labor market behavior, which recorded a decline in unemployment during the year despite the slowdown in growth, particularly in the industrial and services segments, which together represent nearly 93% of employment.
Looking ahead, we initially note that the carry-over into 2026 is low, only 0.2%, compared to 0.8% at the turn of 2024 to 2025 (according to the data available at the time). In light of this, as well as the lagged effects of monetary policy (despite the imminent start of the Selic easing cycle), we expect additional deceleration of GDP growth in 2026, in the range of 1.5% to 2.0%, closer to our estimates of the economy’s potential expansion. Consequently, we do not anticipate a significant reduction in the output gap in 2026.
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