We continue to expect GDP will expand by 1.2% this year, but have raised our projection for 2026 by 0.2ppts to 1.4% growth. Our updated forecast reflects developments in domestic fiscal policy and the reignited US trade war. President Lula da Silva's 2026 income tax reform is likely to lift household consumption by almost 1ppt next year. However, trade uncertainty is likely to drag on investment and therefore demand for labour in the near term, partially offsetting some of the boost form income tax reform.
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