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1. Government partially reverses financial operation tax increase after criticism

After announcing an increase in IOF (Tax on Financial Operations) rates, the government has partially reversed the measure. Investments by domestic funds abroad will remain tax-exempt, and remittances from individuals for foreign investments will continue to be taxed at a rate of 1.1%. The decision was announced by the Ministry of Finance on social media, following discussions and technical assessment.

The change comes after a strong negative reaction from the financial market, which led to a rise in the dollar and a drop in the stock market. The original measure aimed to raise up to R$ 41 billion in 2026 and would have affected even companies under the Simples Nacional tax regime. The government has not stated whether it will publish a new decree to formalize the changes.

InfoMoney: Governo revoga parte de decreto que subiu IOF após repercussão negativa

2. Finance Ministry raises 2025 GDP and inflation projections

The Ministry of Finance has revised its forecast for Brazil’s GDP growth in 2025 to 2.4%, slightly up from the previous estimate of 2.3%. The revision is mainly driven by strong performance in the agricultural sector and an expected 1.6% GDP growth in the first quarter. Despite the positive revision, the Secretariat of Economic Policy (SPE) signals a slowdown in the economy during the second half of the year, maintaining a 2.5% growth projection for 2026.

The forecast for the IPCA (consumer price index) was increased from 4.9% to 5% for this year, remaining above the target ceiling of 4.5% set by the National Monetary Council. The upward adjustment reflects unexpected fluctuations in March’s index and minor revisions in short-term expectations. The SPE anticipates a consistent decline in inflation beginning in September.

By sector, the growth forecast for agriculture was raised from 6% to 6.3%, while the industry projection remained steady at 2.2%, indicating resilience in the face of high interest rates. The services sector also saw an upward revision, from 1.9% to 2%. Among price indices, the INPC rose from 4.8% to 4.9%, while the IGP-DI declined from 5.8% to 5.6%, mainly influenced by wholesale price dynamics and exchange rate variations.

O Globo: Entenda os fatores que têm levado o mercado a revisar projeções para o PIB
Estadão: Ministério da Fazenda aumenta projeção para PIB e inflação em 2025

3. Haddad announces fiscal adjustments and promises new measures

Finance Minister Fernando Haddad stated that the government will continue to announce measures throughout 2025 to ensure it meets its fiscal target of a zero deficit. During the release of the year’s first Revenue and Expenditure Report, he emphasized the government’s commitment to pursuing the central target and noted that there is no need to wait for the upcoming two-month periods to implement new actions.

Among the announcements is a “small adjustment” to the Tax on Financial Operations (IOF), with details to be provided after the technical presentation of the report. Haddad assured that the change will not affect dividends and that other measures are still under review by the presidency and will be announced once finalized.

In addition to these developments, the economic team confirmed a total budget freeze of R$ 31.3 billion, including R$ 10.6 billion in direct spending blocks and R$ 20.6 billion in contingencies. This restraint is part of efforts to rebalance public accounts in the face of rising expenditures, particularly with social security, and to reinforce the government’s commitment to fiscal responsibility.

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CNN Brasil: Vamos continuar anunciando medidas para atingir meta, diz Haddad

4. Economic activity grows and maintains positive trend

Brazil’s economic activity grew by 1.3% in the first quarter of 2025 compared to the previous quarter, according to the Central Bank’s Economic Activity Index (IBC-Br). In comparison to the same period in 2024, growth reached 3.7%, with a cumulative increase of 4.2% over the past 12 months. This performance reflects a strong showing across the industrial, commercial, services, and agricultural sectors, as well as the impact of tax revenue. The IBC-Br serves as a key reference for decisions made by the Monetary Policy Committee (Copom) regarding the Selic interest rate, which currently stands at 14.75% per year.

Despite the positive economic data, inflation remains a pressure point, with a 12-month accumulated rate of 5.53%, driven mainly by food and energy prices. In response, the Central Bank raised the Selic rate by another 0.5 percentage point at its last meeting, maintaining a restrictive monetary policy stance to curb inflation. The continuation of this interest rate hike cycle will depend on the evolving economic scenario in the coming weeks, as the market closely monitors Copom’s signals for potential further adjustments.

Agência Brasil: Atividade econômica tem alta de 1,3% no primeiro trimestre

5. Government freezes R$31.3 billion in the 2025 budget to balance accounts

The federal government has announced a freeze of R$ 31.3 billion in the 2025 Budget, divided between R$ 20.7 billion in temporary contingencies to meet the fiscal target and R$ 10.6 billion in permanent spending blocks to comply with the new fiscal framework’s expenditure cap. According to Finance Minister Fernando Haddad, this adjustment was necessary mainly due to the increase in mandatory spending, such as pensions and the Continuous Cash Benefit (BPC), as well as the need to open R$ 12.4 billion in additional credits. Details on which ministries will be most affected will be released on May 30.

Haddad also attributed part of the contingency to lower-than-expected revenues, driven by the failure to offset payroll tax exemptions and the partial strike at the Federal Revenue Service, which directly impacted tax collection. Additionally, the minister noted that the maintenance of interest rates at higher-than-expected levels has slowed economic activity, contributing to the revenue shortfall.

Agência Brasil: Governo congela R$ 31,3 bi do Orçamento de 2025