Brazil’s government kept its 2023 GDP growth forecast at 2.3%, increasing inflation expectations to 4.9%. Central bank is expected to raise interest rates to 14.25% to combat inflation. Initial growth forecast for 2026 is 2.5%, with inflation anticipated to decrease to 3.5%.
On Wednesday, Brazil’s government reiterated its economic growth forecast for 2023 at 2.3%. This estimate remained unchanged even as the inflation forecast was slightly raised due to minor adjustments in economic projections. The finance ministry’s economic policy secretariat noted that growth in Brazil, the largest economy in Latin America, typically decelerates during the latter half of the year following initial gains in the first quarter.
The announcement arrives amidst a vigorous monetary tightening strategy by Brazil’s central bank, which is expected to implement a third consecutive increase of 100 basis points to raise the interest rate to 14.25%. This measure aims to curb inflationary pressures as the government revised its inflation forecast for the year to 4.9%, an increase from the previous 4.8% estimate made in February. Though a slowdown in food prices is anticipated by year-end, industrial goods costs are expected to rise.
The finance ministry’s report highlighted that “rising protectionism tends to pressure inflation,” specifically attributing this to U.S. President Donald Trump’s tariff policies. However, it suggested that the adverse effects of increased economic uncertainty might alleviate some inflationary pressures.
Additionally, the finance ministry provided initial forecasts for 2026, predicting an increase in growth to 2.5% while inflation is expected to moderate to 3.5%. The government indicated that a growth estimate around 2.5% is applicable for the subsequent years, emphasizing that inflation should align with the central bank’s target of 3% starting in 2027.
In conclusion, Brazil’s government has maintained its GDP growth forecast for 2023 at 2.3% while raising the inflation estimate to 4.9%. This adjustment reflects anticipated changes in food and industrial goods prices. The central bank is likely to continue its tightening measures, with significant implications for economic activity moving forward. Projections for 2026 suggest improved growth and declining inflation rates.
Original Source: money.usnews.com
