Brasília – Signs of economic recovery have led the Brazilian government to change up its 2017 growth forecast. Gross Domestic Product (GDP) is seen climbing 1.6% next year, up from 1.2% as of the prior forecast, the Brazilian Finance Ministry’s Economic Policy secretary Carlos Hamilton Araújo said this Wednesday afternoon (17).
The inflation forecast under the Extended National Consumer Price Index (IPCA) was kept at 4.8%. The numbers will be computed in devising the 2017 Annual Budget Bill due for submission to the National Congress by August 31.
According to the secretary, the federal government will only release the revenue increase expected to result from the revision upon submitting the bill. In case revenues increase more than they were expected to, then the government won’t need to raise taxes in order to meet its BRL 139 billion primary deficit target for next year (government expenses exceeding revenues, excluding debt interest payments).
According to Araújo, recent improvements in financial indicators and signs of an economic rebound enabled the government’s team of economists to change up the growth estimate for next year. He also said that Brazil should start growing again in the fourth quarter of this year.
“In real terms, industrial output has gone up for four straight months. The Monthly Trade Survey from IBGE [the Brazilian Institute of Geography and Statistics] showed signs of stabilization in retail activity, with a 0.1% increase in June. We have reasons to believe that the second half will see a better performance than the first one. Our base scenario is one of GDP growth in Q4 from Q3,” the secretary explained. For 2016, the Secretariat for Economic Policy revised down its GDP contraction estimate from 3.1% to 3%. The IPCA forecast was kept at 7.2%.
The estimates from the government’s team of economists are more optimistic than the market’s. As per the Focus Bulletin, a weekly poll of financial institutions by the Central Bank, Brazil should weather a 3.2% drop in GDP this year, with inflation at 7.31%. In 2017, the poll’s respondents believe GDP should grow 1.1%, with the IPCA inflation rate at 5.14%.
*Translated by Gabriel Pomerancblum
