government expects increase of 3.2% in 2023

The government revised upwards the economic growth estimates for 2023. They went from 2.5% to 3.2%, motivated by the better-than-expected performance for GDP in the second half of the year, which expanded by 0.9%.

According to the Economic Policy Secretariat (SPE) of the Ministry of Finance, the strong increase in the harvest, positive results observed in leading indicators in the third quarter and expectations of recovery of the Chinese economy in the fourth quarter also contributed to raising the projection.

The official expectation is above market projections, which is 2.89%, according to the Focus Bulletin, a weekly survey carried out by the Central Bank among banks, brokers and consultancies.

The GDP expansion projection for the third quarter of the year is 0.1%. A new decline compared to the previous three months is expected for agriculture in the third quarter (-5.3%). The pace of growth in industry (0.4%) and services (0.5%) is expected to slow down, but offsets the strong drop predicted for rural activity.

For 2024, the SPE projects a 2.3% growth in GDP, also above what the market signals (1.5%).

The government assesses that both industry and services should benefit from the reduction in interest rates, debt renegotiation and income transfer policies and investment incentive programs.

“The return of minimum spending on education and health should also boost the public administration component. On the demand side, these policies should positively impact consumption and gross fixed capital formation (GFCF, which is how economists qualify investment) “, informs the secretariat.

The forecast for inflation remained stable at 4.85% in 2023 and increased from 3.3% to 3.4% next year. According to the government, the readjustment of fuels in refineries and their impacts on inflation have been offset by the benign evolution observed in the prices of food at home and underlying services (which support or are essential for the functioning of other economic activities).

The upward revision of inflation forecast for 2024 reflects adjustments resulting from changes in the exchange rate scenario and commodity prices.