Economy celebrates high GDP and sees robustness for greater growth

The Ministry of Economy celebrated this Thursday (1st) the advance of Brazil’s GDP (Gross Domestic Product) in the second quarter and said it sees economic activity consolidated for even greater growth.

“If in the second quarter with real interest at peak, with monetary policy at peak, we grew 1.2%, the economy has the strength to grow even more when these factors ease”, said the head of the Special Advisory for Economic Studies, Rogério Boueri.

The Brazilian GDP grew 1.2% in the second quarter of this year, in comparison with the three immediately previous months, according to the IBGE (Brazilian Institute of Geography and Statistics).

According to the economic team, the result shows a consolidation of the resumption of economic activity, which advanced for the fourth consecutive quarter, despite the impacts of the Ukrainian War and the lingering effects of the pandemic.

The ministry also highlighted that the indicators show the good performance of services, the recovery of employment and the rate of investments at high levels. As indicated by the IBGE, services drove the growth of the economy from April to June, with an increase of 1.3% in the segment.

Measures recently adopted by the government, such as increasing Auxílio Brasil to R$600, are unlikely to have a significant effect on GDP, argued Boueri. As an example, he mentioned that the extraordinary withdrawal of the FGTS (Fundo de Garantia do Tempo de Serviço) had an estimated impact of 0.09 percentage point.

In the latest macrofiscal bulletin from the SPE (Secretariat of Economic Policy), released in July, the economic team raised its GDP growth forecast for 2022 from 1.5% to 2%.

According to Boueri, the current estimate is “dated” and will be revised upwards in the next report, in September. The technician from the Ministry of Economy, however, avoided advancing the new projection.

“2% is already dated, only cargo is already at 2.4%, and we don’t think Brazil will stop growing”, he said. “It will have to go up, for how much is an answer that I will deprive myself because I prefer to give this answer when the SPE people actually run the projections and have the number based on the models”.

After participating in an event in Rio de Janeiro, Minister Paulo Guedes (Economy) praised the strength of the Brazilian economy and once again said that the country is “doomed to grow”. According to the government, Brazil grew more than the G7 countries in the first half of the year.

“What was an optimistic forecast for the entire year, which was to grow 2%, has already been surpassed in six months”, he extolled. “If [o Brasil] not grow anything from here until the end of the year, it already has, what we call ‘carry’ [carrego]a growth of 2.4%”, he added.

The economic team also highlighted that the latest results have led financial market analysts to systematically revise their projections for 2022 GDP, whose median jumped from 0.3% at the beginning of the year to 2.1%, according to the bulletin. Focus released last Monday (29).

The ministry also reinforced its conviction in the strength of economic growth in 2023, despite the pessimism of economists in the private sector.

For 2023, the Ministry of Economy forecasts growth of 2.5%, while economists estimate a rise of 0.37%. as showed the Sheetthis detachment from next year’s GDP projections occurs early when looking at the entire period of the Jair Bolsonaro (PL) government.

According to the government’s economic team, the monetary tightening implemented by the Central Bank to curb inflation is unlikely to have a quick and devastating effect on economic activity.

In early August, the Copom raised the basic interest rate (Selic) by 0.5 percentage point, to 13.75% per year. Since the first movement, when it started from its historic floor (2% per year) in March 2021, the tightening cycle has accumulated an increase of 11.75 percentage points.

“To have very low growth, close to zero in 2023, we will have to have a slowdown, a very large ‘crash landing’, which is unlikely given the effects of monetary policy that are already there,” said Boueri.

According to the ministry’s analysis, if economic activity stagnated in the second half of this year and the average growth in 2023 was 0.3%, the country’s GDP would still advance 1.4% next year.

In the view of the head of the Special Advisory for Economic Studies, this is a conservative scenario. “It needs a very strong external effect for you to take the plausibility out of that 1.4% and 2.9% range,” he said.