Brazil’s first quarter GDP results will be released on Thursday. Thanks to the recovery in the country’s job market and federal government stimulus that has boosted the value of the minimum wage and benefit payments, economists expect the economy to have grown 1.3 percent sequentially and 1.9 percent annually (The think tank Fundação Getulio Vargas was less optimistic, forecasting annual growth of 1.6 percent).
According to the Focus Report, a weekly central bank survey of top-tier investment firms, markets are improving their outlook for Brazil’s economy, expecting year-end inflation to come in lower than originally expected, while expectations for GDP growth remain slightly higher .
The markets’ median forecast for economic growth in 2023 has risen to 1.26 percent for the third consecutive week (from just 1 percent four weeks ago). Meanwhile, the inflation forecast has been lowered to 5.71 percent from 6.05 percent a month ago.
The exchange rate that markets thought would close the year at BRL 5.20 per US dollar is now at BRL 5.11 per dollar.
However, economists expect the economy to slow down after the first quarter. Energy consumption, a key driver of economic activity, fell in April versus March. Average consumption fell 7.7 percent last month, falling across all sectors tracked by the Chamber of Electric Energy Commercialization (CCEE).
A month ago, Finance Minister Fernando Haddad said an economic slowdown due to Brazil’s tight monetary policy (reference interest rates stand at 13.75 percent) would make tax collection more difficult and create fiscal “problems” for the government.
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