The Brazilian economy grew by 0.44 percent in July, according to the Central Bank Economic Activity Index (IBC-Br), considered a reliable predictor of official gross domestic product figures.
While the figures show a deceleration from June, they beat market expectations. A survey by market data company Refinitiv showed that investors predicted a 0.3 percent rise in the IBC-Br index. Annually, the IBC-Br grew by 0.66 percent — and by 3.12 percent in the 12 months through July.
The figures show a Brazilian economy that remains resilient and corroborates growing economic optimism — both from markets and from the government. The Finance Ministry’s expected GDP growth rate for 2023 rose from 1.61 to 3.2 percent since March. Over the same span, the median prediction by analysts surveyed by the Central Bank jumped from 0.9 to 2.89 percent.
Growth projections released by the Finance Ministry on Monday improved across all sectors, with the agricultural sector expecting growth of 14.0 percent, an industry output uptick of 1.5 percent, and services sector growth projected at 2.5 percent.
But despite many positives, Brazil has challenges ahead — notably on the fiscal side.
A recent Quaest survey of investment fund executives shows that 95 percent don’t believe the government will be able to deliver its promise of zero primary deficit in 2024.
Even if recent measures proposed by the government to boost revenue in 2024 pan out, only 14 percent of fund executives believe they will manage to reduce the deficit.
While taxing the so-called ‘exclusive funds’ (which are used by the super-rich) is seen as the most likely to be approved by Congress, only 46 percent of fund executives consider its approval to be ‘highly probable.’
These findings highlight a nuanced economic landscape in Brazil, where positive indicators are tempered by fiscal challenges and a need for policy adjustments to maintain growth momentum.
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