By Jeffrey T. Lewis 

SÃO PAULO--The Brazilian government cut its economic growth forecast for 2014, reflecting the sluggish expansion already seen so far this year.

The country's gross domestic product will grow 1.8% in 2014, compared with the 2.5% projected by the government earlier this year, according to a report released Tuesday. The government also raised its forecast for inflation for the year, to 6.2% from 5.6%.

The estimate for the central government's income excluding transfers to states and municipalities was raised by 714.5 million reais ($332.7 million), to 1.095 trillion reais, after the estimate for transfers was cut.

The government's growth forecast is considered optimistic by most economists, who expect an expansion of only about 1% in 2014. Indicators released earlier this year have pointed to slowing growth, and many economists are predicting that Brazil will suffer a recession at some point in the year.

The news comes at a bad time for President Dilma Rousseff, who faces re-election in October and has been losing ground against her main challenger in recent opinion polls. With inflation above the 6.5% ceiling of the central bank's target range and growth slowing, concerns that Brazil is entering a period of so-called stagflation are intensifying.

The government left its forecast for the exchange rate at the end of the year unchanged at 2.29 reais to the dollar.

Brazil's central bank has been auctioning currency exchange swap contracts regularly for nearly a year to try to prevent the real from weakening against the dollar and adding to inflationary pressures. The central bank targets a 4.5% inflation rate, but it tolerates a range of two percentage points in either direction.

Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com