The financial market forecast for the growth of the Brazilian economy this year rose from 2.71% to 2.76%. The estimate is in today’s Focus bulletin (24), a survey released weekly by the Central Bank (BC), in Brasília, with the projection for the main economic indicators.
For next year, the expectation for the Gross Domestic Product (GDP) – the sum of all goods and services produced in the country – is for growth of 0.63%. In 2024 and 2025, the market projects GDP growth of 1.8% and 2%, respectively.
The forecast for the Broad National Consumer Price Index (IPCA) – considered the country’s official inflation – also varied downward, from 5.62% to 5.6% this year. It is the 17th consecutive reduction in the projection. For 2023, the inflation estimate was 4.94%. For 2024 and 2025, the forecasts are 3.5% and 3%, respectively.
The forecast for 2022 is above the ceiling of the inflation target that must be pursued by the BC. The target, defined by the National Monetary Council, is 3.5% for this year, with a tolerance interval of 1.5 percentage points up or down. That is, the lower limit is 2% and the upper limit is 5%.
In September, driven mainly by the drop in fuel prices, there was deflation of 0.29%, according to the Brazilian Institute of Geography and Statistics (IBGE). This was the third consecutive month of deflation and the smallest change for a month of September since the beginning of the historical series, which began in 1994. As a result, the IPCA accumulates a high of 4.09% in the year and 7.17%, in the last 12 months.
interest and exchange
To achieve the inflation target, the Central Bank uses the basic interest rate, the Selic, as its main instrument, defined at 13.75% per year by the Monetary Policy Committee (Copom). The rate is at the highest level since January 2017, when it was also at that level.
Tomorrow (25) and Wednesday (26), the Copom will hold the penultimate meeting of the year to discuss possible changes in the Selic, but the market forecast is that it will be maintained and end the year at the same 13.75%. By the end of 2023, the estimate is that the base rate will fall to 11.25% per year. For 2024 and 2025, the forecast is for Selic at 8% per year and 7.75% per year, respectively.
When the Copom increases the basic interest rate, the purpose is to contain the heated demand, and this has an impact on prices because higher interest rates make credit more expensive and encourage savings. Thus, higher rates can also make it more difficult for the economy to expand. In addition to the Selic, banks consider other factors when defining the interest charged to consumers, such as default risk, profit and administrative expenses.
When the Copom lowers the Selic, the tendency is for credit to become cheaper, with incentives for production and consumption, reducing control over inflation and stimulating economic activity.
The expectation for the dollar rate remained at R$ 5.20 for the end of this year. For the end of 2023, the forecast is that the American currency will remain at this same level.
