Analysts raise inflation and GDP forecast in Brazil in 2023

In 2023, Brazilians may face higher inflation again. That’s because the federal government began collecting fuel taxes earlier this month, and these items have a significant impact on the country’s inflation rate.

In summary, the most recent challenges started in 2020: covid-19 pandemicwhich affected global supply chains, affecting all logistics worldwide.

This reduced supply in 2021, during which time demand began to recover. As the demand was greater than the supply, the world began to face a significant increase in the prices of goods and services.

In 2020, the pandemic also led to the loss of millions of jobs across the planet. Thus, people could not maintain the same consumption habits because incomes had fallen, but prices had only risen.

Global supply chains have begun to stabilize in the past year, however war between Russia and Ukrainecaused a sharp increase in the prices of a number of products, mainly commodities.

Central banks started raising interest rates more intensively in 2022 to curb inflation. In Brazil, the central bank raised interest rates 12 times in a row for the economy between March 2021 and August 2022. As a result, Selick’s rate rose to 13. .75% annually, the highest level since 2016.

Even the rise in interest rates helped keep inflation in the country in 2022. However, the impact of a higher interest rate is usually clearer only a year or two after the increases.

For this reason, inflation in Brazil, which already lost strength last year, should decrease further this year and in 2024. Meanwhile, interest rates should remain high for some time.

Brazil’s GDP estimates rose

The Focus report also revealed new analyst estimates for Gross Domestic Product (GDP) Brazilian. This week, the financial market slightly raised its forecast for the growth of Brazil’s economy in 2023, from 0.85% to 0.89%.

In particular, the fourth consecutive increase reflects greater optimism among the country’s analysts regarding economic activity this year, although progress has been very timid. In fact, Brazil’s GDP growth should be much lower than that recorded in 2022.

As for 2024, the forecast remained stable for the 11th week in a row at 1.50%, meaning Brazil’s GDP should grow more significantly next year as the impact of inflation in the country should be much smaller.

Finally, for the fourth week in a row, analysts estimated the Selick rate to remain at 12.75% per year in 2023. This figure refers to the main interest rate of the Brazilian economy. As for next year, the Selic rate should remain at 10.00%, a level that is still high and will continue to affect the incomes of Brazilians.

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