Government maintains GDP growth forecast at 2.2% in 2024 and sees greater expansion next year

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Estimates were released by the Treasury’s Economic Policy Secretariat. Government projects inflation of 3.5% in 2024, above the target, but within the tolerance range. According to IBGE, in 2023, GDP recorded a growth of 2.9% compared to the previous year Jornal Nacional/ Reproduction The Economic Policy Secretariat (SPE) of the Ministry of Finance maintained its estimate this Thursday (21) growth of Gross Domestic Product (GDP) in 2024 at 2.2% — the same level that had been projected in November of last year. GDP is the sum of all goods and services produced in the country. The indicator serves to measure the evolution of the economy. In 2023, official data from IBGE show that GDP recorded a growth of 2.9% compared to the previous year. By projecting an increase of 2.2% this year, the government expects a slowdown in the growth rate of the Brazilian economy. The federal government’s estimate remains above the financial market’s projection, which predicts growth of 1.80% for this year. The expectation was collected by the Central Bank in the Focus bulletin, which heard from more than 100 banks last week. The Central Bank estimates economic growth of around 1.7% in 2024. The projection was released in December last year through the inflation report. “Growth in 2024 should be more balanced, based on the advancement of cyclical sectors and the expansion of domestic absorption”, assessed the Ministry of Finance. For 2025, the Ministry of Finance also maintained the expectation of Brazilian GDP growth, which remained at 2.8%. As a result, the government expects economic activity to accelerate next year. The financial market, in turn, projects an economic expansion of 2% next year. GDP 2023: Haddad celebrates the result and predicts an increase of 2.2% for 2024 Growth in the coming years According to the economic team, some factors should help the economy’s growth in the medium term, which should be close to 2.5%. Among them: Tax reform should reduce the cumulative nature and complexity of taxation, making it more equitable across sectors. The PAC, Nova Indústria Brasil, Minha Casa Minha Vida and the Ecological Transformation Plan will stimulate investments, as well as policies such as the granting of sovereign guarantees for PPPs, incentives for innovation and exports by public banks and accelerated depreciation . Microeconomic and regulatory measures, such as the new guarantee framework; the new infrastructure debentures; ‘currency hedge’ for long-term sustainable investments; the creation of a sustainable taxonomy and a regulated carbon market, among others, which will enable a reduction in the cost of credit and the development of the capital market. Inflation The Ministry of Finance improved its estimate for the Broad National Consumer Price Index (IPCA) in 2024. In November, the government had estimated that inflation would reach 3.55% this year, a value that fell to 3.50% in document released today. The central inflation target is 3% this year, and will be considered formally met if the index oscillates between 1.5% and 4.5% this year. The financial market estimated, last week, that the IPCA will reach 3.79% in 2024. For 2025, the economic team expects inflation of 3.10%, an increase compared to the previous estimate, released in November last year, of 3%. The central inflation target defined for 2025 is 3%, which can be met if it remains between 1.5% and 4.5%. The higher the inflation, the lower people’s purchasing power, especially those who receive lower salaries. This is because the prices of products increase, without wages keeping up with this growth. The Central Bank’s main instrument for containing inflation is the basic interest rate, currently at 10.75% per year after six consecutive drops. If inflation projections are in line with targets, the BC can lower interest rates. Otherwise, choose to maintain the rate or even increase it. “The impact of El Niño on inflation in food, ethanol and electricity tariffs was less intense than initially expected. Furthermore, adjustments already observed for items monitored this year were lower than expected, with emphasis on licensing and registration of vehicles and energy tariffs”, informed the Ministry of Finance. According to the government, prices of industrial goods are still benefiting from excess idle capacity in China, in parallel with the gradual disinflation that continues to be observed in services.

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