Brazil’s GDP may grow 3% in 2022, but with a weaker 2nd semester

The higher-than-expected growth of the Brazilian economy in the second quarter caused a wave of revisions in estimates for this year’s GDP (Gross Domestic Product). Projections now indicate a high close to 3% in 2022.

The expectation, however, is for a deceleration in the last six months of the year, even with the stimuli adopted by the federal government for the electoral period. There are disagreements among analysts regarding the size of the loss of breath.

The Brazilian GDP grew 1.2% in the second quarter, compared to the three immediately previous months, according to data released this Thursday (1st) by the IBGE (Brazilian Institute of Geography and Statistics).

The results of the first six months already guarantee a growth of 2.6% for the year, if the economy remains stable in the second semester – the so-called statistical legacy.

Bank of America raised its forecast for this year’s GDP from 2.5% to 3.25%. For 2023, it maintained growth of 0.9%.

According to the institution, measures to make fuel cheaper and the increase in Auxílio Brasil should have a great positive influence on this semester’s results, while the global slowdown and the lagged effects of the increase in interest rates in Brazil help to put a brake on activity.

Alberto Ramos, from Goldman Sachs, revised the projection for real GDP growth in 2022 from 2.2% to 2.9%. He says recent tax cuts and the above-the-spending benefit package are expected to add approximately 0.7% of GDP in fiscal stimulus this year. On the other hand, still high inflation, high interest rates, a slowdown in the global economy and political uncertainty “will likely add headwinds” to activity.

Itaú Unibanco’s forecast of 2.2% should move towards something between 2.5% and 3%, says economist Natália Cotarelli.

According to her, the GDP should show a loss of breath during the second half of the year, under the effect of higher interest rates, which play against the recovery of consumption.

“The perspective for the second half of the year has not changed much. We expect a slowdown in the economy, the GDP walking sideways”, he points out. For now, Itaú Unibanco forecasts a slight increase of 0.2% in 2023.

The projection of Fiesp (federation of industries of São Paulo) is 2.6% for this year, but only 0.2% next year. The entity says that the strong fiscal expansion at the beginning of 2022 offset the negative effects of the high level of interest rates. “The first semester may have been the best moment of the Brazilian economy in the year. The second semester should not repeat the same dynamism”, says the entity, in a note.

Laiz Carvalho, Brazil economist at BNP Paribas, says he expects growth of close to 1% for the third quarter. She says that the highlight of the last quarter was the better-than-expected recovery of the service sector, with the contribution of larger temporary transfers to the population. “In the third quarter, there is greater Auxílio Brasil and vouchers for drivers. The perspective is that these transfers help, and the GDP for the quarter is also very positive.”

President of Itaú Unibanco, Milton Maluhy Filho stated that, despite the above-expected GDP, the scenario looking forward still inspires caution. “Monetary policy has not yet had the effect it is expected to have,” the executive said on Thursday in a conversation with journalists.

“In addition, current inflation is very high, which continues to put pressure on the ability to pay, especially for low-income people.”

Maluhy Filho also said that the fiscal policy from 2023 is the main doubt that hovers in the market, and that it will be the variable that will direct the economy in the coming years. According to him, fiscal responsibility must remain present and independent of the outcome of the elections.

Daniel Xavier Francisco, from the economic department of the ABC Brasil bank, raised the forecast from 2.2% to 2.8% for the year’s GDP. Available antecedent data, according to him, indicate a slowdown in growth to 0.4% in the third quarter and an unchanged GDP result in the last three months of the year, a reflection of tighter financial conditions.

“In this second semester, we will still have remaining fiscal stimulus and marginal improvement in labor market data, while the effect of more restrictive real interest rates will start to weigh on the other side.”

Impacts of reopening and stimuli

According to economists, the 1.2% rise in the second quarter of this year may be associated with the effects of the reopening of economic activities, especially services, after the restrictions in the pandemic.

The growth in employment in the labor market and the adoption of incentives such as withdrawals from FGTS (Service Time Guarantee Fund) accounts and the anticipation of the 13th anniversary of retirees also generated impacts.

“It is a good result. There is no doubt. The question is: continuing with this growth is very difficult”, analyzes economist Claudio Considera, coordinator of national accounts at FGV Ibre (Brazilian Institute of Economics of Fundação Getulio Vargas).

In the view of Mirella Hirakawa, senior economist at AZ Quest, economic activity shows a stronger performance than initially expected. In light of this scenario, the institution also raised its forecast for this year’s GDP, from 2.2% to 2.8%.

For 2023, the expectation, however, is for a decline of 0.4%. The previous forecast was down 0.5%. “We expect monetary policy to do its job,” says Hirakawa.

Banco Original, in turn, began forecasting a 2.7% increase in GDP this year. The previous estimate was 2.3%.

“In conversations with internal bank, industry and retail customers, we were informed that companies are already preparing for the end-of-year festivities and expect that sales can also benefit from the World Cup event,” he said. the original.

In July, the government’s economic team raised its GDP growth forecast for 2022 from 1.5% to 2%. The Ministry of Economy reported this Thursday that the number will be revised upwards.