Brazilian government lowers GDP growth forecast for this year and raises inflation forecast

The Brazilian Government lowered yesterday, Friday, the Gross Domestic Product (GDP) growth forecast for this year from 2.1% to 1.61% and raised it for inflation from 4.6% to 5.31%.

As the Ministry of Finance disclosed in the Macrofiscal Bulletin, the previous GDP projection, published in November last year, minimized the effects of high-interest rates on the economy and the credit market.

“These effects (economic slowdown) were already partially verified during the last quarter of 2022 when the economy retreated 0.2 percent and credit concessions began to decelerate more sharply,” the report noted.

According to the government, the service sector and industry should be affected by the fall in demand caused by the interest rate hike and credit contraction.

“The economic slowdown should occur in both the service and industrial sectors. The population’s high indebtedness and income commitment should affect the pace of activities in the service sector,” he said.

The Finance Ministry stressed that the slowdown in industry and services is likely to occur, even with the planned social protection measures announced recently.

The report also reduced the projected primary deficit (negative result of government accounts, excluding interest on public debt) from R$125.99 billion (about US$23.9 billion) to R$99.01 billion (about US$18.78 billion), while the government’s gross debt went from 79.1 percent of GDP to 77.6 percent.

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