government celebrates, but sees difficulties ahead

The government celebrated the first-quarter GDP result, saying it “raises the positive bias” of its full-year forecast, now at 1.9%. However, the note released by the Economic Policy Secretariat (SPE) of the Ministry of Finance also lists some difficulties ahead – among them, interest rates.

Due to seasonal reasons, agribusiness growth will not be as strong in the second quarter, and the prospects for the industry are weak. The text highlights “the retreat in the flow of heavy trucks, the drop in the production of cars and buses and the trajectory of the confidence indices of industry and business”, and states that interest rates are also uncooperative.

For services, says the note from the SPE, the prospects remain favorable for the second quarter, thanks to the increase in formal employment and disposable income, with the increase in the minimum wage and the deceleration of inflation. The statement also cites the tax reduction for automobiles – announced but not yet implemented.

For the remainder of the year, the economic team sees positive vectors from the Desenrola debt renegotiation program, which has not yet been launched, from Minha Casa Minha Vida and from recently announced industry stimuli. It also has advances in fiscal and tax reforms. However, the SPE warns that the expected slowdown for the global economy and the level of interest rates “still prevail” in the scenario for 2023.