The Omie Economic Performance Index of SMEs (IODE-SMEs) indicates that the revenue of small and medium-sized enterprises (SMEs) in the Southern region increased by 8.4% compared to the previous year. The national sector growth was 4.5% in 2024. In the fourth quarter, the index showed a 3.3% increase compared to the same period the previous year.
In addition to the Southern region, the IODE-SMEs signals that market growth was mainly driven by the strong performance in the Northeast (+8.3%) and Southeast (+3.7% compared to 2023). SMEs in the Central-West region (+0.1%) remained stagnant, while those in the North (-10.4%) declined.
The data from the index indicates a performance superior to the overall GDP of the country in the past year. According to the BCB Focus Bulletin, the market median expectations for the GDP of 2024 (which will be officially closed in March/25) are at the level of 3.5%.
The IODE-SMEs functions as an economic thermometer for companies with annual revenues of up to R$50 million, monitoring 736 economic activities that make up four major sectors: Commerce, Industry, Infrastructure, and Services.
Figure 1: IODE-SMEs
(Index number – base: average 2023=100)
Source: IODE-SMEs (Omie)
The performance of the domestic market, according to Felipe Beraldi, economist and manager of Indicators and Economic Studies at Omie, was conditioned by the expansion of domestic demand and indicates a loss of momentum in the segment, especially in the Industry and Services sectors. “In recent years, there has been a strong increase in real disposable income for families, in a context of fiscal expansion with income transfer programs and payment of court orders. It is also necessary to consider the support of a heated labor market, unemployment close to the low historical level of 6% of the last decade, and real incomes on the rise and already higher than the pre-pandemic period,” he explains.
Figure 2: IODE-SMEs – sectoral breakdowns
(2024 x 2023)
Source: IODE-SMEs (Omie)
Commerce
The main contributor to the improvement of SMEs market in 2024 was Commerce, with an 8.1% growth compared to the previous year. The economist points out that companies in this sector began a recovery trend from the second quarter of the previous year, after a very challenging 2023, reflecting the context of consumption growth in the country. In 2024, the results were positive for wholesale (+9.0% YoY) and for retail (+6.4% YoY), with emphasis on ‘Foods’, ‘Beverages’, and ‘Hygiene, Cleaning, and Household Preservation Products’.
In retail, signs of recovery were more consistent for SMEs in the second half of 2024, evidenced by the continued growth of Commerce over the last six months. Among the activities with the best performance are ‘Office Equipment’, ‘Food Products’, ‘Pharmaceutical Products with Formula Manipulation’, and ‘Hydraulic and Electrical Materials’.
Services
Another sector of the small and medium-sized business market that resumed growth in the previous year was Services, with an increase of 2.5%, even despite the slowdown in the last months of the year (+1.2% in 4Q2024). “The increase also impacted the labor market, with most of the formal job growth concentrated in activities in the Services sector throughout 2024,” the economist emphasizes. Stand out ‘Financial and insurance activities’, ‘Transportation and storage’, ‘Human health and social services’ and ‘Information and communication’.
Industry
Industrial SMEs decelerated in the second semester, with a 1.5% YoY contraction in 4Q2024. Nevertheless, the sector ended 2024 with a 2.2% higher revenue compared to 2023, according to IODE-SMEs.
In this context, the sector’s progress was less widespread among the different industry activities in the last few months. Out of the 23 subsectors monitored by the index, only 11 showed an increase in the fourth quarter of 2024 on an annual basis. They are: ‘Printing and reproduction of recorded media’, ‘Transport equipment’, ‘Maintenance, repair, and installation of machinery and equipment’, and ‘Machines, appliances, and electrical equipment’.
Infrastructure
The small and medium-sized Infrastructure companies ended the last year with a 0.8% increase compared to 2023. After a first semester of declines, the area resumed expansion starting in August.
Beraldi adds the influence of the municipal elections period to the sector. “If on the one hand, it energizes some activities, on the other, high interest rates tend to inhibit the evolution of civil construction. Thus, the expansion of Infrastructure was driven by ‘Waste collection, treatment, and disposal,’ ‘Electricity,’ and ‘Specialized services for construction,’” he comments. Meanwhile, segments of civil construction, such as ‘Infrastructure works’ and ‘Building construction,’ presented lower revenue.
SMEs are expected to grow in 2025, but at a more moderate pace
Outlooks, based on IODE-SMEs, indicate a growth of 2.4% in 2025, following an average advance of 6.9% per year in the 2023-24 biennium. According to the economist, despite macroeconomic challenges and increasing uncertainties in the domestic economy, there are elements that should support the continuity of the evolution of the Brazilian economy this year, albeit with some slowdown.
In general, this continuity is supported by a context of sustaining family income – with unemployment at the low level of 6.1% and the absence of clear signs of reversal. This context tends to favor some segments of the market more sensitive to income, such as Services and some segments of Retail (food products, hygiene items, pharmaceutical products, etc.).
On the other hand, the high inflation expectations in the country and the increase in the benchmark interest rate by the Central Bank in recent months are expected to restrict the momentum of consumption and investments, with repercussions on SMEs, especially from the second quarter of this year. As a result, there will be challenges in 2025 for the performance of segments more dependent on credit evolution, such as industrial, commercial activities, and civil construction.
The business environment this year is expected to be highly susceptible to shocks in the national and international scenarios. ‘Internally, there is the addressing of fiscal issues (balancing government revenues and expenditures), as well as the approval of the Tax Reform, which takes effect from 2026, but entrepreneurs are advised to estimate the impacts of the changes as soon as possible,’ advises Beraldi. ‘Regarding the external scope, in addition to monitoring geopolitical tensions worldwide, keeping an eye on the political and economic developments of the U.S. at the beginning of the Trump administration is quite relevant, given the significant impacts on the economies of developing countries, like Brazil,’ adds.
