The Central Bank’s economic activity index (IBC-Br), considered a reliable bellwether of Brazilian GDP data, came in slightly below domestic analysts’ expectations in January.
The index, which measures the pace of Brazilian economic activity, rose 0.6 percent, compared with a median forecast of 0.65-0.7 percent in analyst surveys. The index slowed from December, when it rose 0.82 percent. Compared to the previous year, however, the IBC-Br is up 3.4 percent.
Because of this annual growth, many analysts see the index as a good omen for the Brazilian economy in 2024. Economist and independent consultant André Perfeito, for example, predicts that Brazil’s GDP will grow 2.2 percent this year, above the market’s median expectation of 1.78 percent, according to the Central Bank’s latest Focus Report.
According to him, some market analysts have yet to factor into their projections not only more robust growth for this year, but also more persistent inflation.
This scenario, Mr. Perfeito argues, is likely to lead to a revision of expectations for Brazil’s benchmark interest rate. However, few expect any change at this week’s meeting of the monetary policy committee.
Analysts at the research arm of the country’s largest private bank, Itaú BBA, expect the committee not only to cut the rate by another half percentage point to 10.75 percent, but also to maintain guidance for further cuts of the same magnitude.
For Alberto Ramos, Goldman Sachs’ lead economist for Latin America, Brazil’s economic activity in 2024 should continue “to benefit from significant fiscal stimuli (federal fiscal transfers to low-income families with a high propensity to consume), the turnaround in the economic cycle credit and solid growth in real household disposable income,” despite still restrictive domestic monetary conditions, high levels of household debt, and low levels of available margin in the economy.
Goldman Sachs points to a carry-over effect of 1.2 percent in the first quarter of 2024.
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