Government revises GDP estimate to 5.3% in 2021 and sees inflation hit the target ceiling – Prime Time Zone

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Macrofiscal Bulletin data show greater optimism with the economic recovery after positive results in the first quarter; expectation for the IPCA goes to 5.9%

Washington Costa/Ministry of EconomyGovernment revised GDP forecast upwards amid optimism about the economic recovery after the shock caused by the health crisis

The federal government revised upwards the forecasts for the expansion of the Brazilian economy and the inflation in 2021, according to data from the Macrofiscal Bulletin released this Wednesday, 14, by the Secretariat for Economic Policy (SPE). The estimate for the Gross Domestic Product (GDP) went from 3.5% to 5.3%. For next year, the economic team slightly raised the forecast to 2.51%, compared to 2.5% in the report published in May. The expectation for 2023 remained at 2.5%. The high was justified by the positive results registered in the first quarter, when the economy advanced by 1.2%, according to the Brazilian Institute of Geography and Statistics (IBGE). For the second half of the year, the federal government estimates that GDP will grow by 0.25%. Despite the more optimistic tone, the economic team stressed that the scenario remains uncertain because of the new coronavirus pandemic and the recent energy crisis. “Thus, activity projections for this and the coming years are particularly sensitive to the release of data and the unfolding of the effects of Covid-19 and the vaccination process, especially considering its effects on long-term GDP. The energy sector scenario is also another component of increasing unpredictability.” The financial market revised the GDP advance to a high of 5.26%, compared to 5.18% estimated last week, according to data from the Focus Bulletin published on Monday, 12. The forecast for 2022 has changed slightly, from 2.10% to 2.09%. In June, the central bank raised expectations for economic growth to 4.6%, against a forecast of 3.6% in March.

To Broad Consumer Price Index (IPCA), the official gauge of Brazilian inflation, the Ministry of Economy projects an increase of 5.9% in 2021. In the Macrofiscal Bulletin released in May, the forecast was 5.05%. The number is above the ceiling of the target pursued by the Central Bank, of 5.25%, with a center of 3.75% and a floor of 2.25%. For 2022, the economic team estimates that inflation will end at 3.5%. The SPE pointed out the strong advance of monitored prices for the overflow of the target ceiling. “In the 12-month period up to June, this group registered an increase of 13.0%. This increase is due to significant increases in the prices of fuel and electricity, given the changes in tariff flags”, he informed. The financial market changed the IPCA forecast for the 14th week in a row and started to see inflation at 6.11% at the end of 2021. The index was 8.35% in the 12 months ended in June, when it increased by 0.53 %. The Central Bank has already abandoned the expectation of closing 2021 below the target ceiling. The estimate published in the second quarter’s inflation report pointed to an increase of 5.8% in view of the increase in prices. commodities and the recent pressure from electricity. According to the president of the monetary authority, Roberto Campos Neto, inflation has spread through the economic chain, but the pressures are still temporary in nature.