Brazil central bank improves 2023 GDP growth forecast to 2.0%

BRASILIA (Reuters) – Brazil’s central bank joined on Thursday a wave of recent upward revisions for the country’s economic growth this year, guided by a solid first quarter boosted by the agriculture sector.

In its quarterly inflation report, the central bank forecasts a 2.0% expansion in gross domestic product (GDP) for 2023, up from the 1.2% estimate in March.

The figure came slightly below the 2.18% growth expected by private economists in a weekly survey conducted by the bank and remains weaker than last year’s 2.9% GDP expansion.

“The revision mainly reflects positive surprises in some industrial and service sector activities in the first quarter, in addition to improved forecasts for agriculture,” said the report.

The central bank emphasized that the outlook ahead points to an economic slowdown as the cumulative effects of domestic monetary policy and the influence of global growth deceleration take hold.

The report also revealed a wider projection for this year’s current account deficit at $45 billion from $32 billion in the previous report.

The worsening was primarily driven by a lower trade balance surplus of $54 billion compared to the $62 billion estimated in March.

Regarding bank lending, the central bank now anticipates a 7.7% increase in 2023, up from the 7.6% reported before.

Following last week’s decision to maintain interest rates at a cycle-high of 13.75% for the seventh consecutive policy meeting, the central bank reinforced in the report that its future actions would be data-dependent, focusing on inflation dynamics and expectations.

The minutes from the decision indicated that most policymakers see the possibility of a “parsimonious” rate cut at the next meeting in August, contingent upon consolidating a more benign inflation scenario.

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