Whether incumbent President Luiz Inácio Lula da Silva or opposition candidate Flávio Bolsonaro wins Sunday’s runoff, the next president will face significant economic challenges in 2027.

With a population of 214 million and a nominal GDP of US$4.1 trillion, Brazil is the second-most populous country in the Americas and the continent’s second-largest economy, trailing the United States in both categories.

It is also a member of the G20 and the de facto leader of the South American Mercosur bloc. Its election is therefore being closely watched around the world, particularly in Argentina, one of Brazil’s key trading partners.

According to the analysts consulted by the Herald, whoever takes office on January 5 will have to balance efforts to ease the government’s fiscal burden against the risk of slower economic growth.

Where Brazil’s economy stands ahead of the runoff

Honorio Zabaleta, an economist at consulting firm Eco Go, told the Herald that Brazil’s economy is entering the runoff with “resilience,” although it is “gradually losing some momentum.”

According to official data, GDP grew 0.5% quarter-on-quarter and 2% year-on-year in the second quarter.

Meanwhile, the IBC-Br, a monthly economic activity indicator published by Brazil’s Central Bank, rose just 0.3% in August after declining in June and July. The figures point to a slowdown after stronger growth at the start of the year.

Zabaleta noted that the unemployment rate stands at 5.3%, down from 5.6% a year earlier, while real wages are rising. However, he said, “the latest data point to a slowdown, particularly in consumption.”

“This makes sense in a context of very high real interest rates,” the economist added.

Brazil’s benchmark interest rate, the Selic, stands at 13.75%, while consumer price inflation, as measured by the official IPCA index,........

© Buenos Aires Herald