Brazil Maintains GDP Forecast Amid Rising Inflation Estimates

Brazil’s government maintained its GDP growth forecast for 2023 at 2.3%, raising its inflation estimate to 4.9%. The central bank plans to implement a significant rate hike to combat inflation, with forecasts for 2026 suggesting 2.5% growth and inflation dropping to 3.5%.

On Wednesday, Brazil’s government maintained its GDP growth forecast at 2.3% for this year, while marginally adjusting its inflation outlook to 4.9%, up from 4.8% in February. The finance ministry highlighted that Brazil’s economy, being the largest in Latin America, is expected to experience a slowdown in growth during the latter half of the year after a robust expansion in the first quarter.

The central bank is currently implementing strict monetary policies, anticipated to include a third consecutive 100-basis-point interest rate increase, raising the rate to 14.25%. Policymakers aim to mitigate inflation, which they foresee easing in food prices but increasing in industrial goods.

The finance ministry’s report also addressed the influence of rising protectionism, particularly referencing U.S. tariffs under President Trump’s administration. It stated, “Rising protectionism tends to pressure inflation,” but added that such effects could be offset by uncertainties affecting economic activity.

Furthermore, initial forecasts for 2026 suggest a modest growth of 2.5% while estimating a decline in inflation to 3.5%. The ministry noted that growth expectations close to 2.5% would be observed in the following years, with inflation tending towards the central bank’s 3% target starting in 2027.

In summary, Brazil’s government has kept its growth forecast unchanged while slightly increasing its inflation estimate, indicating upcoming economic challenges. The central bank’s tightening policies aim at controlling inflation, which presents pressures from international trade dynamics. Future forecasts are positive, predicting a gradual growth in GDP and stabilization of inflation rates.

Original Source: www.marketscreener.com