Banks Bradesco and BNP Paribas on Friday (29) revised their forecasts for economic growth in Brazil this year.
Bradesco raised its estimate for Brazilian gross domestic product (GDP) growth to 2.3% from 1.8%. BNP raised its forecast from 1.5% to 2.5%. This information was provided by the newspaper O Estado de Sao Paulo.
The reports of the two institutions indicated that the change in expectations for Brazilian GDP was due to positive surprises related to the domestic economy, the labor market, and more fiscal stimulus.
“The extraordinary withdrawal of the FGTS between May and June and the heated labor market are likely to have favored the increase in household consumption during this period,” the Bradesco report states.
“The measures recently approved by the National Congress, such as the increase in the Auxílio Brasil and tax subsidies, should support a continued positive performance in the third quarter, postponing the previously expected slowdown,” the document adds.
The BNP Paribas report points to the rapid growth of the labor market, with the creation of more than 1.3 million formal jobs from June 2022, and the unemployment rate, which is below pandemic levels.
“Real wages are still lower than in 2020, indicating that there is no pressure on the labor market. We expect further improvement before a reversal in 2023″, says the report signed by Laiz Carvalho, economist for Brazil, and Gustavo Arruda, research director for Latin America at BNP Paribas.
Given the better-than-expected economic performance and the ever-surprising developments in the labor market, Bradesco forecasts that the unemployment rate will fall to 8.0% by the end of this year.
According to the BNP report, the global outlook will continue to impact Brazil. The institution cites “high inflation, high interest rates and low growth” as the main features of the global economy for some time.
“While global growth and higher commodity prices have helped Brazilian GDP this year, we believe these two factors will be less helpful going forward,” the BNP Paribas economists’ report said. According to the report, commodity prices should continue to rise compared to pre-pandemic prices, but the scope for further increases is likely to be limited.