Brazil Retains 2023 GDP Growth Forecast Amid Rising Inflation Expectations

Brazil’s government holds its 2023 GDP growth forecast at 2.3% but raises inflation to 4.9%. Despite a predicted slowdown in growth during the second half of the year, the central bank’s monetary policies aim to manage inflation, which they foresee decreasing in subsequent years.

The Brazilian government has retained its GDP growth forecast for 2023 at 2.3%, while slightly increasing its inflation projection due to minor adjustments in their base case scenario. According to the finance ministry’s economic policy secretariat, growth in Brazil, the largest economy in Latin America, is expected to decelerate in the latter half of the year, following initial expansion in the first quarter.

This announcement coincides with the Brazilian central bank’s aggressive monetary tightening measures aimed at curbing inflation, with an anticipated third consecutive increase in interest rates to 14.25%. The government now projects inflation for this year at 4.9%, a slight rise from the earlier estimate of 4.8% released in February; the ministry predicts a slowdown in food prices by year-end, while costs for industrial goods are expected to rise.

The ministry highlighted that “Rising protectionism tends to pressure inflation,” referencing the tariff policies from the United States under President Donald Trump. Nonetheless, they also noted that these inflationary pressures might be counterbalanced by the adverse effects of heightened uncertainty on economic activity.

Additionally, the finance ministry provided initial forecasts for 2026, predicting a growth rate of 2.5% for the following year, with inflation expected to decrease to 3.5%. The projection suggests a consistent growth rate nearing 2.5% will extend into the ensuing years, while inflation is anticipated to align closer to the central bank’s target of 3% from 2027 onwards.

In summary, Brazil’s government has maintained a GDP growth forecast of 2.3% for 2023 amid increased inflation expectations of 4.9%. While growth is expected to slow in the latter half of the year, the central bank’s tightening measures aim to stabilize pricing pressures. Looking ahead, forecasts for 2026 predict growth to reach 2.5% while inflation may reduce to 3.5%.

Original Source: www.marketscreener.com