Brazil's government maintains 2025 GDP forecast, sees higher inflation

SAO PAULO (Reuters) - Brazil's government on Wednesday kept its economic growth forecast for this year unchanged at 2.3%, while slightly increasing its inflation estimate due to "marginal changes" to its base case scenario.

The finance ministry's economic policy secretariat said in a report that gross domestic product growth in Latin America's largest economy tends to slow down in the second half of the year, after an activity expansion in the first quarter.

The remarks come as Brazil's central bank drives an aggressive monetary tightening cycle to cool inflation, with policymakers widely expected to deliver a third straight 100-basis-point interest rate hike to 14.25% later on Wednesday.

The government estimated inflation this year at 4.9%, up from the 4.8% forecast in February, saying it expects food prices to slow by year-end but costs of industrial goods to speed up.

"Rising protectionism tends to pressure inflation," it said, pointing to U.S. President Donald Trump's tariff policies. "This effect, however, may be mitigated by the negative impact of greater uncertainty on activity."

The finance ministry also released its initial forecasts for 2026, saying that growth next year would reach 2.5% whereas inflation was estimated to slow to 3.5%.

The projection of growth close to 2.5% applies to "the coming years," it noted, adding that inflation should be close to the central bank's 3% target from 2027 onwards.

(Reporting by Camila Moreira and Gabriel Araujo; Editing by Andrew Heavens and Chizu Nomiyama)

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