Brazil’s government cut its GDP growth forecast to 2.3% for 2023 and raised the inflation outlook to 4.8%. This adjustment reflects ongoing monetary tightening and anticipated economic conditions. While private-sector predictions are lower, the central bank’s policy focus remains on easing inflation while supporting a gradual economic slowdown.
On Thursday, Brazil’s government reduced its economic growth forecast for 2023 to 2.3%, reacting to continued monetary tightening measures. Concurrently, the inflation outlook was raised to 4.8%, significantly higher than the previous projection of 3.6% from November. The finance ministry originally anticipated a GDP growth of 2.5% this year, highlighting a shift towards a less optimistic economic environment.
For 2024, Brazil’s economy is predicted to grow at a slower pace of 3.5%, according to forthcoming official GDP data scheduled for early March. Economic Policy Secretary Guilherme Mello emphasized the realism and credibility of their outlook, which is open to reassessment based on economic shifts. He expressed concern over U.S. trade policies under Trump but believes the sectoral impacts won’t significantly disrupt the overall economy.
The rise in inflation is expected to result from the delayed effects of currency depreciation alongside inflationary inertia. Brazil aims for a 3% inflation target with a range of tolerance plus or minus 1.5 percentage points, indicating a likelihood of surpassing this threshold for the second consecutive year. In 2024, inflation is predicted at 4.83%.
Although the government revised its growth and inflation forecasts, their projections remain more optimistic than private-sector economists. These economists, surveyed weekly, predict GDP growth at 2.03% and inflation increasing to 5.58% this year. The central bank has estimated inflation at 5.2% with GDP growth at 2.1%, stressing the economy’s need for a slowdown to mitigate inflation.
Central bank head Gabriel Galipolo stated that authorities would take the necessary time to evaluate the persistence of the economic cooling trend. Additionally, interest rates were raised by 100 basis points to 13.25% in January, with indications of a similar increase expected in the March meeting. Mello noted that key recent data suggests a gradual economic deceleration is already in progress, evidenced by confidence indicators and declining job creation, alongside a less inflation-prone composition of growth driven by the strong agricultural sector’s output.
Brazil has revised its GDP growth forecast downward to 2.3% for 2023 while raising its inflation projection to 4.8%. This outlook indicates a more conservative economic environment impacted by monetary tightening. Concerns about U.S. trade policies and the inflationary impacts of currency depreciation complicate the economic landscape, though the government maintains a slightly more optimistic view than private sector analyses. The central bank’s measures emphasize the need to cool the economy to manage rising inflation effectively.
Original Source: www.tradingview.com
