Government reduces estimated GDP increase in 2023 and starts forecasting inflation within the target

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Government expects Brazil to grow 3% this year – previous forecast was 3.2%. Central inflation target is 3.25% – and will be considered met if it remains between 1.75% and 4.75%. The Ministry of Finance reduced this Tuesday (21) the growth estimate for the Gross Domestic Product (GDP) in 2023. Now, the government expects a 3% increase in GDP this year. In September, the government had estimated an increase of 3.2%. 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. According to the Secretariat for Economic Policy (SPE), the reduction in the GDP growth estimate is partly explained by “less optimistic projections for the services sector for the remainder of the year”. “For the last quarter, however, the prospect of activity acceleration continues, a scenario that should guarantee growth in 2023 slightly higher than the previous year.” If the projection is confirmed, GDP growth in 2023 will be slightly above that recorded last year. In 2022, the economy recorded an expansion of 2.9%, according to data from the Brazilian Institute of Geography and Statistics (IBGE). Even with the reduction, the federal government’s estimate is above the financial market’s projection, which predicts growth of 2.85% for this year. The estimate was collected by the Central Bank in the Focus bulletin, which interviewed more than 100 banks last week. For 2024, the Ministry of Finance also reduced the Brazilian GDP growth expectation, from 2.3% to 2.2%. Inflation The Ministry of Finance improved its estimate for the Broad National Consumer Price Index (IPCA) in 2023. In September, the government had estimated that inflation would reach 4.85% this year. The new forecast is for inflation to remain at 4.66% – within the target range stipulated by the National Monetary Council (CMN). “The disinflation process occurred faster than initially projected, (…) taking inflation within the range proposed by the target regime in 2023”, explained the SPE. For 2023, the central inflation target was set at 3.25% by the CMN and will be considered formally met if it oscillates between 1.75% and 4.75%. For 2024, the economic team expects inflation of 3.55%.

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