IMF raises Brazil’s growth forecast in 2022, but sees weakness for 2023

The IMF (International Monetary Fund) significantly raised its estimate for the growth of Brazilian activity this year despite the difficulties faced by global economies, but at the same time began to see weaker performance in 2023.

In reviewing global estimates in its Global Economic Perspective report, the IMF now sees GDP (Brazilian Gross Domestic Product) growth this year at 1.7%, well above the 0.8% rate calculated in April.

But for 2023, the IMF report, released this Tuesday (26), shows that the expansion of activity will be 1.1%, 0.3 percentage point less than expected in April.

The market has also been raising its forecast for Brazilian growth this year, after a better-than-expected first half, and worsening next year’s, given the expectation that the monetary tightening will impact activity more significantly and amid to concerns about the country’s fiscal health. The most recent Focus report shows that experts consulted by the Central Bank see GDP growth of 1.93% in 2022 and 0.49% in 2023.

The IMF estimate, however, is still a little below that of the government, which estimates that Brazilian GDP should grow 2.0% this year. The Ministry of Economy’s calculation is even stronger in 2023, with a forecast increase of 2.5% for GDP.

The improving outlook for Brazil helped boost the outlook for growth in Latin America and the Caribbean, with the IMF now seeing the region’s GDP increase by 3.0% this year, 0.5 points higher than in the previous report. .

But similarly, the estimate for Latin America and the Caribbean next year has worsened by 0.5 point to 2.0%.

“While the revisions are mostly negative for advanced economies, different exposures to key developments mean that those for emerging markets and emerging economies are varied,” the IMF said.

Among the reasons that led the IMF to reduce its forecast for world GDP in 2022 by 0.4 point, to 3.2%, are higher inflation worldwide, a stronger-than-expected slowdown in China due to new outbreaks of Covid-19 and negative repercussions of the Ukrainian War.

For China, the Fund cut growth prospects by 1.1 point for 2022 and 0.5 point for 2023, to 3.3% and 4.6% respectively.

This was one of the main reasons for the weaker scenario forecast for emerging markets and developing economies –3.6% in 2022 and 3.9% in 2023, with cuts of 0.2 and 0.5 percentage points respectively.

“The risks to the outlook are predominantly negative. The Ukrainian War could lead to a sudden halt in gas imports from Russia into Europe; it could be harder to reduce inflation than expected if labor markets are tighter or if inflation expectations de-anchor”, listed the IMF.

The Fund also cited as global risks the possibility of tighter financial conditions leading to difficulties in emerging and developing markets, as well as an escalation of the real estate crisis in China and geopolitical fragmentation affecting global cooperation and trade.