Politics

Markets continue to raise Brazil’s GDP forecast for 2022 and 2023


The markets’ median projection for the growth of the Brazilian economy in 2022 rose again, from 2.26 to 2.39 percent, according to today’s Focus Report, a weekly survey by the Central Bank with top-rated financial institutions. Analysts have now raised their expectations for 11 straight weeks. 

The optimism is still an effect of the 1.2-percent quarterly growth of the country’s economy between April and June, published on September 1. Markets have been excited about a combination of extraordinary factors that heated up the economy, including government aid measures, commodity price shocks, and high savings levels driven by the pandemic.

Looking closely at the demand side, growth was driven by consumer spending, rising 2.6 percent in the quarter and 5.3 percent year-on-year. On the supply side, the services sector was the main driving force, advancing 4.5 percent from one year prior.

For Q3 2022, boosted cash-transfer payments (as well as the creation of other stimulus programs targeting truckers and taxi drivers), along with anti-inflationary measures, should continue to improve household purchasing power and increase domestic demand.

Nevertheless, these measures’ positive effects may have dissipated by the end of the year. By then, the consequences of the Central Bank’s monetary tightening policy will have kicked in, which means stagnation or even recession in the last quarter of the year.

For 2023, the midpoint of expectations went up from 0.47 to 0.5 percent. The major threats to the country’s growth going forward are the size of its public debt and the country’s fragile fiscal situation.





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