"The economy is performing below its potential, public debt is high and rising, and, even more importantly, medium-term growth prospects remain uninspiring," the International Monetary Fund said in a preliminary note to its final report.

The final report on the results of the visit, made under article IV of the financial institution, will still take a few weeks to be completed.

This note with preliminary data indicates that Brazil's economy could grow about 1.8 percent, supported mainly by "domestic consumption and investment."

The forecast is far worse than the 2.3 percent that the IMF itself had predicted in May.

IMF experts said Brazil's economic recovery is still underway but faces "significant risks" due to "uncertainty about the continuity of the reforms and the current tightening of global financial conditions," the IMF said.

It was sobering news for Brazil's politicians as the country gears up for an October presidential election.