MercoPress. South Atlantic News Agency

Inflation projections in Brazil lowered yet again

The new figures are still above the 3.5% target set by the National Monetary Council (CMN)

Brazil's Economy Ministry Thursday released its Macrofiscal Bulletin, which showed that inflation for the year 2022 is projected to amount to 5.85%, an improvement from the previous 6.3% forecast.

The Economic Policy Secretariat (SPE) handling the report also announced no changes in GDP growth, which was maintained at 2.7%.

The National Wide Consumer Price Index (IPCA) dropped from 6.3% to 5.85%, which is still above the inflation target for the year, set by the National Monetary Council (CMN) at 3.5%, with a tolerance interval of plus/minus 1.5 percentage points.

So far in 2022, the IPCA has already accumulated a 4.7%, and 6.47% yoy.

The National Consumer Price Index (INPC), used to establish the value of the minimum wage and to correct pensions, should end this year with a variation of 6%, according to the SPE forecast, a drop of 0.54 percentage points from the previous bulletin. The projection for the General Price Index - Domestic Availability (IGP-DI), which also includes the wholesale sector and the cost of civil construction, as well as the final consumer, is 6.11%, below the previous estimate of 9.44% and below 2021 figures (17.74%).

Meanwhile, the estimate for the increase in the Gross Domestic Product (GDP, the sum of goods and services produced in the country) was 2.7%, the same number released in the previous bulletin, in September. According to the SPE, the performance of employment, the services sector, and the investment rate justified the maintenance.

“As highlighted in previous bulletins, a slowdown in economic activity was already expected in the second half of this year, as a result of the delayed effects of the monetary policy adjustment cycle [interest rate increase by the Central Bank]. However, it is projected that the impacts from the increase in interest rates will be reduced over the next year,” the SPE said.

In 2021, Brazil's GDP grew 4.6%, totaling R$ 8.7 trillion. Despite maintaining the estimate for 2022, the SPE reduced the growth forecast in 2023 from 2.5% to 2.1%. According to the agency, a more adverse external scenario, with the increase in interest rates in the US and the war in Ukraine, affects the economic expansion in the rest of the world. The projection for 2024 was maintained at 2.5%.

According to the Economy Ministry, there was an expansion in the labor market, with the unemployment rate falling to 8.7% in the third quarter, according to the Continuous National Survey of Household Sampling (PNAD Contínua), of the Brazilian Institute of Geography and Statistics (IBGE). According to IBGE, the service sector indicators had an annualized expansion of 3.2% from July to September.

Despite recognizing the slowdown in the economy in the third quarter, the SPE expects the economic recovery to continue in the fourth quarter, driven by services and stability in agriculture and cattle breeding. According to the agency, the increase in the Selic basic interest rate accounts for the drop in the pace of growth.

“After the strong recovery until 2Q22 [second quarter], the economic activity decelerated throughout the third quarter of 2022, resulting mainly from the performance of industry and trade. Monthly data from antecedent and coincident indicators signal the continuity of the economic recovery in the fourth quarter, although at a less intense pace, largely due to the lagged effects of monetary policy, as signaled in previous bulletins,” the bulletin stated.

(Source: Agencia Brasil)