Ahead of Q2 GDP announcement, economists improve outlook for 2023

Days before statistics institute IBGE releases GDP results for this year’s second quarter, analysts raised their projections for 2023 GDP to 2.31 percent. Last week, the median forecast of experts consulted by the Central Bank’s Focus Report sat at 2.29 percent.

After strong growth in the first three months of the year (1.9 percent), thanks to a bumper soybean harvest and better-than-expected performance in agribusiness, economists imagine that results from April to June will show a slowdown. Bradesco and XP, for example, estimate a 0.5 percent increase in economic activity in Brazil in the second quarter compared to the first quarter. 

Nevertheless, most analysts believe the country will grow more than expected at the beginning of the year, supported by a lower, albeit restrictive, policy rate. Markets project 2.7 percent growth from Q2 2022. Since June, when first-quarter GDP results came out, projections by the Central Bank’s Focus bulletin have risen 0.63 p.p. from 1.68 percent growth.

On the other hand, despite higher than expected mid-July inflation, analysts maintained their projections for this year’s IPCA at 4.90 percent — the same as the previous week but above the Central Bank’s target ceiling of 4.75 percent. The pressure coming from a low comparison base with 2022, fuel prices by Petrobras, and the resilience of the service sectors are likely to slow down the disinflationary process that the country experienced in the first half of the year, hence the higher end-year projections.

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