Brazil's economic and social progress between 2003 and 2014 lifted 29 million people out of poverty and inequality dropped significantly (the Gini coefficient fell by 11% in the same period, down to 0.515). The income level of the poorest 40% of the population rose, on average, 7.1% (in real terms) between 2003 and 2014, compared to a 4.4% income growth for the population as a whole. However, the rate of poverty and inequality reduction has been showing signs of stagnation since 2015.
Brazil is currently going through a deep recession. The country's growth rate has decelerated steadily since the beginning of this decade, from an average annual growth of 4.5% between 2006 and 2010 to 2.1% between 2011 and 2014. The GDP contracted by 3.8% in 2015. The economic crisis - coupled with the political crisis now facing the country - has contributed to undermining the confidence of consumers and investors. The crisis was further exacerbated by commodity price drops and the deterioration of investor sentiment with regard to emerging markets.
The realignment of regulated prices combined with the pass-through of exchange rate depreciation have caused an inflation peak in 2015 (with an inflation rate of 10.7% in December), exceeding the upper limit of the target band (4.5 ± 2%). The inflation rate of administered prices has been decelerating and will, most likely, be the main driver of the moderate slowdown expected in 2016. It is expected, however, to remain above the target ceiling for the year.
The government has proposed a set of macroeconomic adjustment measures and is setting the stage for structural reforms. In early 2015, the government began a macroeconomic adjustment process based on an ambitious fiscal consolidation plan. Monetary and exchange rate policies have been adjusted to reduce inflation expectations and enable a drop in the real exchange rate. The policy agenda also included measures to boost competitiveness, productivity and investments. However, implementation of the reform program has proven difficult given the challenges in reaching a consensus in Congress.
The fiscal adjustment is undermined by budget rigidities and a difficult political environment. Less than 15% of expenditures in Brazil are expected to be discretionary. Most public spending is mandatory (mandated by the Constitution or other legislation) and increases in line with revenues, nominal GDP growth, or other pre-established rules. Additionally, a large portion of revenues are earmarked for education and health. Attempts to pass legislation to increase revenue collection in the short term and address issues of a more structural nature - such as pensions - have so far fallen short of the government's intentions.
The crisis has led to significant adjustments in the balance of payments current account. By December 2015, the current account deficit had dropped to 3.3% of the GDP - in comparison with 4.3% in the previous year - in response to the contraction of the GDP and a 30% depreciation of the domestic currency. Foreign direct investment accounted for 4.2% of the GDP during the same period, thus funding 132% of the current account deficit. Brazil's has maintaining an ample level of reserves of US$ 358 billion - or 18 months of imports - at the end of 2015.
Brazil’s medium-term outlook will depend on the success of the current adjustments and the enactment of further growth-enhancing reforms. Raising productivity and competitiveness is the crucial challenge for the country to achieve higher growth in the medium-term. With the recession of growth drivers over the past decade — credit-fueled consumption, labor expansion and the commodity boom — growth will need to be based on higher investments and productivity gains.
Brazil boasts extreme regional differences, especially in social indicators such as health, infant mortality and nutrition. The richer South and Southeast regions enjoy much better indicators than the North and Northeast.
Despite the achievements in poverty reduction over the last decade, inequality remains at relatively high levels for a middle-income country. After achieving universal coverage in primary education, Brazil is now struggling to improve the quality and outcomes of the system, especially at the lower and upper secondary levels.
Great progress has also been achieved in reducing deforestation in the rainforest and other sensitive biomes. However, the country still faces major development challenges - especially in finding ways to combine the benefits of agricultural growth, environmental protection and sustainable development.
Brazil played a key role in formulating the climate framework for the 2015 COP 21, the most recent round of international climate negotiations. The country has once again demonstrated its leadership role in international negotiations on climate change, showcased by significant contributions to climate change mitigation within its borders. Brazil has voluntarily committed to reducing its greenhouse gas emissions between 36.1% and 38.9% by 2020 - and it will likely reach that objective sooner.
 Measured by the national poverty line of R$ 140 in 2012