IMF raises Brazil’s GDP growth forecast above 2 percent

The International Monetary Fund has raised its growth forecast for Brazil to 2.1 percent in the most recent edition of its World Economic Outlook report. In the April edition of the report, the IMF expected growth of 1.2 percent. 

The gulf between April predictions and current forecasts is even wider with regard to expectations for 2024. The fund expected the Brazilian economy to shrink by 0.3 percent next year, a figure now revised to a 1.2 percent growth rate.

A surge in agricultural production in Q1 2023, which had positive spillovers to activity in the services sector, is the main reason for this increase, according to the fund. In the first three months of the year, the sector grew by an astonishing 21.6 percent, the highest quarterly rate in 27 years, pushing overall GDP growth in Q1 to 1.9 percent. 

Economists at the Brazilian Institute of Economics at think tank Fundação Getulio Vargas believe that soybeans alone will account for 20 percent of Brazil’s growth this year. And Brazil’s crops are what explain the country’s persistent trade surpluses.

Stronger-than-expected growth in Brazil led the IMF to improve its forecast for Latin America as a whole to a 1.9 percent expansion. That is an increase of 0.3 percentage points from April. Nevertheless, the new projection is a slowdown from the region’s 3.9 percent growth last year, with the momentum of the post-Covid recovery ending and lower commodity prices.

In contrast, global growth is projected to fall from an estimated 3.5 percent in 2022 to 3.0 percent in 2023 and 2024.

The fund’s forecast revisions are in line with market analysts’ perceptions of the Brazilian economy. According to the Focus Report, a weekly survey conducted by the Central Bank with top-rated investment firms, the median prediction for yearly growth has gone up from 0.79 percent at the beginning of 2023 to 2.24 percent now.

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