O Ministry of Economy strongly raised its projection of economic growth for this year at 5.3% and even increased the estimate of inflation at 5.90%, a level above the target ceiling for the period, according to a bulletin released by the Economic Policy Secretariat on Wednesday. It is the first time that the portfolio forecasts inflation above the target this year.
- Interest, Dollar, Inflation, BC, Selic. Understand all the terms of economics. Sign the EXAM
The previous bulletin, from May, projected an expansion of the Gross Domestic Product of 3.5% and inflation of 5.05% this year.
For 2022, the estimates moved to a growth of 2.51% in GDP and an increase in the IPCA of 3.5%, against 2.50% and 3.50% respectively before.
The inflation target for this year is 3.75% and for 2022 it is 3.50%, both with a tolerance margin in the target of 1.5 percentage points more or less.
The SPE highlighted in the document that the GDP result in the first quarter of this year showed that the Brazilian economy is recovering from the economic crisis caused by the Covid-19 pandemic at higher rates than in those resumed after previous recessions. But he highlighted the high degree of uncertainty due to the effects of the pandemic and the intensification of hydrological risk. “The main driver of this recovery has been the improvement in investment,” the bulletin completed, noting that in recent weeks there has been an advance in mass vaccination in Brazil against the coronavirus, with the expectation that this will have positive effects on the projection of growth of the economy.
“In the current economic recovery, investment is mostly financed by the private sector itself. In other words, investment is now allocated to where it is most efficient and no longer where the State determines. Thus, there is an increase in the share of credit. with free resources as a percentage of GDP,” he explained.
According to the secretariat, among other factors that promote economic growth in Brazil are the high international liquidity and rising commodity prices, as well as the higher savings rate, robust credit growth with private sector financing and greater investment growth .
In the short term, the government estimates a GDP growth of 0.25% in the second quarter of this year compared to the first, and 12.93% over the same period in 2020. Between January and March this year, Brazil registered growth of 1.2% over the previous quarter.
Estimates point to a contraction of 1.17% in agriculture between April and June over the three previous months, but expansion of 2.09% in industrial activity and 0.41% in services on the same basis of comparison.
Regarding the rise in the IPCA, the bulletin highlighted that the index has been more strongly impacted by variations in the group of monitored products, resulting from significant increases in fuel and electricity prices, given the changes in tariff flags.
In the 12 months up to June, the IPCA accumulated an increase of 8.35%, after rising 0.53% in the month, pressured by electricity and fuels. The estimate for Brazilian economic activity this year was in line with that calculated by specialists in the Central Bank’s Focus survey, which points to a forecast of GDP expansion of 5.26% in 2021, but 2.09% in 2022.
For the rise of the IPCA, the weekly survey projects 6.11% this year and 3.75% next.