Focus Bulletin: market predicts fall in GDP and inflation – 10/23/2023 – Market

For the first time in six months, economists consulted by the BC (Central Bank) reduced the forecast for this year’s GDP (Gross Domestic Product). In the Focus bulletin released this Monday (23), the market estimates growth of 2.90%, a decrease of 0.02 percentage points compared to last week, when the index was at 2.92%.

The market had been promoting changes in expectations, but always upwards in the last six months. The last time there was a drop compared to the previous week’s forecast was on April 17, when the market predicted a GDP of 0.976%, below the 0.9947% of the previous week.

After that, the report showed stagnation or increase each week. The result comes in the week following the release of the IBC-Br (Central Bank Economic Activity Index), a GDP indicator, which registered a drop of 0.77% in August compared to July, according to seasonally adjusted figures.

The contraction was greater than expected by the market, which estimated a reduction of 0.30% according to a survey by the Reuters news agency. After the release of the index on Friday (20), the Minister of Finance, Fernando Haddad, once again stated that he is concerned about the results of the third quarter.

“We are concerned about the level of activity, especially in the third quarter, knowing that inflation is converging towards the target over time, as is the case all over the world,” said Haddad at the Ministry of Finance’s office in São Paulo.

Despite the fear, the minister maintains the expectation that Brazil should end the year with growth of around 3% in GDP, but said that it is necessary to see what growth will be like at the margin, because that is what will project the economy’s performance in the future. future.

If there was a drop in the forecast for 2023, economists maintained the same indices for GDP in 2024 (1.5%), 2025 (1.9%) and 2026 (2%).

Regarding inflation, the market also revised its forecast and reduced the IPCA (Broad National Consumer Price Index) rate by 0.1 percentage point, going from 4.75% to 4.65%. The expectation also fell for 2024 (from 3.88% to 3.87%) and remained at 3.5% for 2025 and 2026.

This is the second consecutive downward adjustment to this projection, after the IBGE reported earlier this month that the IPCA started to rise 0.26% in September, after rising 0.23% in August.

The center of the official target for inflation in 2023 is 3.25% and for 2024, 2025 and 2026 it is 3%, always with a tolerance margin of 1.5 percentage points more or less.

Another change seen in the Focus bulletin was in the dollar for 2026, which fell from R$5.20 to R$5.19. In other years, the forecast remains at R$5 (2023), R$5.05 (2024) and R$5.10 (2025).

The market maintained expectations for the basic interest rate, the Selic, for the next four years at 11.75% (2023), 9% (2024) and 8.5% (2025 and 2026).

_{With information from Reuters}