Government raises official GDP growth estimate to 2.5% in 2023 and starts projecting lower inflation

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Fazenda released estimates for the economy this year. If confirmed, growth of 2.5% will mean a slowdown in economic activity compared to 2022, when the country grew by 2.9%. The Ministry of Finance announced this Wednesday (19) an estimate that the country’s Gross Domestic Product (GDP) will grow 2.5% in 2023. In May, the government had estimated a rise of 1.91% for GDP this year. In June, the expectation had been revised to 2.4%. GDP is an indicator used to measure the evolution of the economy. It is the sum of all goods and services produced in the country. Not always, however, does the rise in GDP necessarily equate to social well-being. “More than 40% of the expected growth for the year is due to the dynamics of the agricultural sector. For the other productive sectors, the projected scenario continues to consider a slowdown compared to the previous year, still as a result of the contractionary monetary policy [taxa de juros elevada, em 13,75% ao ano] and the lower pace of global growth”, informed the Ministry of Finance. Despite the increase, the expectation of the Ministry of Finance represents a slowdown compared to 2022, when the economy recorded an expansion of 2.9%. The federal government’s estimate remains above of the financial market projection, which foresees a growth of 2.24% for this year. The estimate was collected by the BC in the Focus bulletin, which heard more than 100 banks in the last week. The Central Bank estimated, at the end of last month , growth of 2% for the Brazilian economy in 2023. For the year 2024, the Ministry of Finance maintained the expectation for growth in the Brazilian Gross Domestic Product (GDP) at 2.3%. Economic Policy of the Ministry of Finance, Guilherme Mello, had anticipated that the government intended to revise the GDP estimate to a level between 2.5% and 3%.Understand why families are spending less and how this impacts on Brazil’s GDP Inflation The Ministry of Finance also estimated that the Extended National Consumer Price Index (IPCA) for 2023 will add up to 4.85%. In May, the government’s forecast was that inflation would reach 5.58% this year. For this year, the central inflation target was set at 3.25% by the National Monetary Council (CMN) and will be considered formally met if it fluctuates between 1.75% and 4.75%. “Inflation expectations were revised downwards, reflecting the positive surprises with the release of the IPCA for April and May; the readjustment authorized for the health plan slightly lower than projected; the reduction in the prices of gasoline, diesel and bottled gas at refineries; and revisions in tariffs for residential electricity and urban buses”, informed the government. If confirmed, this will be the third year in a row that the inflation target has been exceeded, that is, in which the IPCA is above the ceiling set by the target system. In 2022, inflation amounted to 5.79%. Last week, the financial market estimated that the IPCA will reach 4.95% this year. The higher the inflation, the lower the purchasing power of people, especially those earning lower wages. This is because the prices of products increase without wages accompanying this growth. For the year 2024, the Ministry of Finance lowered its official inflation estimate from 3.63% in May to 3.30%. The 2024 inflation target, defined by the National Monetary Council (CMN), is 3% and will be considered met if it fluctuates between 1.5% and 4.5% That is, the government’s forecast remains within the target ceiling of inflation, but it is gradually moving away from the center of the 3% target. Inflation at Home: See How Prices Have Changed

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