Bradesco raises GDP forecast to 1.5% this year

Bradesco economists estimate that Brazil’s economy will grow 1.5% this year. They revised the projection on Monday (9). It was 1%.

It’s still very low GDP growth, but:

1) From 2017 to 2019, after the Great Recession and before the epidemic, GDP grew by an average of 1.4% per year;

2) At the beginning of this year, the median forecast compiled in the Central Bank’s Boletim Focus was a rise of 0.3% of GDP;

3) Until April 29, the median of the Focus was 0.7% (about 130 institutions send economic forecasts to the BC weekly). It’s the latest Focus forecast;

In the first quarter of this 2022, growth would have been 1.3%. In this second, it would be 0.3%, according to the Department of Research and Economic Studies at Bradesco. At the end of last week, economists at Itaú estimated growth of 1% in the first quarter and 0.6% in the second.

The accumulated growth in the first semester would therefore be a tic above 1.6%, in the estimation of the two banks. In the second half of the year, the economy would go into the red: GDP for each quarter would be lower than the previous one. The drop would be smaller in Bradesco’s estimate, greater in Itaú’s, which forecasts annual growth of 1% in 2022.

There is a risk that forecasts will go sour, of course. There is a risk of a financial shock caused by the change in interest rate policy in the United States. The war in Ukraine could do further damage to confidence and commodity prices. The Covid outbreaks in China bring down the country’s industrial production, its economic growth and contribute to world inflation.

Even with growth of 1% or more in the first quarter, according to economists at these two big banks, the socioeconomic situation remains dire. What must have improved or deteriorated in everyday life?

The number of people in employment increased by around 8.2 million from March 2021 to March 2022. Average labor income continues to show a loss, in real terms (discounting inflation), and is the lowest in a decade.

But the number of people with some kind of work is also the highest since 2022 and the unemployment rate is the lowest since 2016, although the occupancy level is still low, lower than in 2017. Occupancy level is the proportion of people employed among those of working age.

Where does this very modest improvement come from? “The recovery in the service sector dictates the pace of the economy … the data shows a recovery in the service sector and the labor market beyond the expectations we had at the beginning of this year.”

In the second quarter, the expanded income mass (sum of work income and other income, such as social benefits), will be increased by the partial withdrawal of the FGTS accounts. It should be an increase of about R$ 30 billion, an increase of 4.2% in the mass of expanded disposable income. This money should offset part of the losses with inflation. But it’s transient high, it’s easy to see.

Bank credit remains at a good level and, according to an exclusive survey by Bradesco, is expanding slightly. Consumer confidence increased in April, according to the FGV survey; that of businessmen as well, apart from those of commerce.

Inflation remains under pressure. Bradesco expects the IPCA to end the year up by 7.5% (Ita’s staff predicts 8.5%). For both banks, public debt measured as a proportion of GDP (debt/GDP ratio) ends the year at 80% of GDP, down compared to 2021. High inflation, high commodities and GDP growing a little more than expected help to reduce the debt burden a little.