Central Bank improves projection for GDP growth in 2022

The BC (Central Bank) improved the projection for GDP (Gross Domestic Product) growth in 2022 and stated that the price index has retreated in the last three months due to the effects of tax measures and the recent drop in commodities. The information is contained in the Quarterly Inflation Report released this Thursday (15).

According to the autarchy, “underlying inflation remains high and at a level incompatible with meeting the target, but there are incipient signs of cooling at the margin, including in the services segment”.

According to the report, the IPCA (Extended Consumer Price Index) for the quarter ended in November was 0.17 percentage points above the reference scenario presented three months ago, emphasizing that this surprise occurred because part of the expected reduction did not materialize in residential electricity tariffs after the tax cut and there was a substantial increase in the prices of in natura foods.

The BC also said that the probability of inflation exceeding the target ceiling this year rose from 93% to a level close to 100%, while the chance of an overflow in 2023 rose from 46% to 57%.

BC improves projection for GDP growth

The forecast for 2022 economic growth increased to 2.9% from 2.7% earlier. The alteration was greatly influenced by the “revision of the historical GDP series, which resulted in an increase in the interannual result for the first half of the year”, stated the BC.

The monetary authority left unchanged the perspective of expansion of 1.0% for GDP in 2023, which had been estimated in September.

The assessment for next year reflects a “prospective scenario of deceleration in economic activity” and the projections are more uncertain than usual because domestic and foreign uncertainties remain high.

The Ministry of Economy, in turn, forecasts expansion of 2.7% for GDP this year and 2.1% for the next, while the market, according to the most recent Focus bulletin, estimates that the economy will grow 3.05 % in 2022 and 0.75% next year.

With regard to monetary policy, the BC reiterated the message from the Copom (Monetary Policy Committee) minutes that it will remain vigilant, assessing whether the strategy of maintaining the basic interest rate for a sufficiently prolonged period will be able to ensure the convergence of inflation.

Currently, the basic interest rate is 13.75% per annum.

Credit expansion estimate in 2022 is expanded

The Central Bank forecast credit growth in the country of 15.1% this year, compared to an estimate of 14.2% made in September. Now, the expectation is that credit to families will rise 18.1% in 2022, against previous expectations of 16.4%. For companies, the high was calculated at 10.9%, compared to 11.2% in the last report.

For the stock of free credit, in which rates are freely agreed between banks and borrowers, the municipality now projects an expansion of 16.3% (+17.2% before). For earmarked credit, which meets the parameters set by the government, the outlook is for an increase of 13.4% (+9.7% before).

According to BC accounts, the expansion of the stock of credit in 2023 will be 8.3%, against 8.2% estimated in September. In this case, the monetary authority sees a rise of 9.0% in credit to individuals (8.7% in the previous projection) and 7.3% in credit to companies (compared to 7.4%).

In 2023, the stock of credit with nonearmarked resources is expected to expand by 8.6% (it was 9.6% in September), while the balance with earmarked resources is expected to rise by 8.0% (against 6.0%) .

Current account deficit in 2022 expected to worsen

The BC worsened its estimate for the deficit in current transactions to US$ 60 billion (R$ 320.4 billion) this year, compared to the shortfall of US$ 47 billion (R$ 250.9 billion) projected in September, foreseeing a deficit for 2023 of US$ 49 billion (R$ 261.6 billion), against US$ 36 billion (R$ 192.2 billion) in the previous estimate.

In its Quarterly Inflation Report, the BC started to see IDP (Direct Investments in the Country) of US$ 80 billion (R$ 427.2 billion) in 2022, over US$ 70 billion (R$ 373.8 billion). In the view of the monetary authority, the level should be at US$ 75 billion (R$ 400.5 billion) in 2023, the same level projected in September.

In BC accounts, the trade balance will have a surplus of US$ 41 billion (R$ 218.9 billion) this year (against a previous estimate of US$ 42 billion), while next year trade will be positive in US $46 billion (R$245.6 billion) (compared to the previous projection of $54 billion).