Market reduces projection for Brazilian GDP in 2023 from 1.75% to 1.69% -Focus report

RIO DE JANEIRO, BRAZIL – The median of the market projections for the growth of the Brazilian economy in 2022 remained at 0.29% in the Focus Report of the Central Bank (BC), released this Monday (24), with estimates collected until the end of last week.

For 2023, however, the midpoint of expectations for expanding the Gross Domestic Product (GDP) was reduced from 1.75% to 1.69%. For 2024, it remained at 2.00%.

According to central bank estimates, the median market forecast for GDP growth in 2021 has fallen again, from 4.50% to 4.48%.

The Brazilian Institute of Geography and Statistics (IBGE) ‘s official data will be known on March 4 and the fourth-quarter figures.

Until then, any updates of the economists’ bets for last year will continue to be informed by the monetary authority through its Market Expectations System, also on Mondays, but starting at 9 am.

The Brazilian economy shrank 0.1% in the third quarter of the year, compared to the second quarter, in the seasonally adjusted series, the IBGE reported in early December, characterizing the entry into a technical recession – two consecutive quarters of contraction -, with the 0.4% drop in the second quarter compared to the previous one.

INFLATION AND SELIC

The median projection of market economists for the Broad National Consumer Price Index (IPCA) for 2022 rose from 5.09% to 5.15%. For 2023, it remained at 3.40%, and for 2024, at 3.00%.

For the basic interest rate (Selic), the mid-point of the expectations remained at 11.75% for 2022, 8.00% for 2023, and 7.00% for 2024.

The Brazilian official inflation rate was 10.06% in 2021; the IBGE reported earlier this month. This is the highest accumulated annual inflation since 2015 (10.67%) and exceeds the target set by the National Monetary Council (CMN) for the Central Bank, of 3.75%, with a tolerance interval of 1.5 percentage points (p.p.).

The Monetary Policy Committee (Copom) raised the Selic rate by 1.5 percentage points in its last meeting, in early December, from 7.75% to 9.25% per year, the highest level since October 2017. It was the seventh consecutive hike and was already expected by the market.

In the statement, Copom informed that it anticipates another adjustment of the same magnitude in the next meeting, scheduled for February 1 and 2.

The inflation target pursued by the Central Bank is 3.50% in 2022, 3.25% in 2023, and 3.00% in 2024, always with a margin of 1.5 percentage points above or below.

The median of the estimates for the dollar at the end of this year was maintained at R$ 5.60. For 2023, the midpoint of the forecast for the US currency rose from R$ 5.46 to R$ 5.50 between one week and the next. For 2024, it remained at R$ 5.40.