2019 GDP was revised from 0.90% to 1.12%
The Brazilian government increased its projection for economic growth to 2019 and 2020. The estimated Gross Domestic Product for 2019 was revised from 0.90% to 1.12%. For 2020, the forecast is for GDP to expand by 2.40%, compared to the previous forecast of 2.32%. The Estimates are in the Macrofiscal Bulletin of the Economic Policy Secretariat (SPE) of the Ministry of Economy, released yesterday (14).
According to the survey, activity indicators have shown results above market expectations, especially in the services, trade and construction sectors, which explains the upward revisions of the projections for economic growth. The release of FGTS funds has also been instrumental in stimulating the economy.
“In the second half of 2019, a key part of the resumption of growth came from the stimulus given by the release of FGTS resources, which is expected to extend throughout the first quarter of 2020. In addition, the creation of the anniversary draw has the potential to change the outlook in the labor and credit markets, boosting the economy in the coming years,”.
Employment and credit
The Ministry of Economy also points out that there is a growth in the creation of formal jobs, which, historically, leads to an acceleration in the forecast of GDP growth. “Formal employment has been accelerating in recent months, showing signs of a warming economy, which is critical for activity as productivity in the formal sector is higher than in the informal sector.”
According to the survey, one of the important sources for increasing activity and productivity was the consistent expansion of free credit (in which banks have the autonomy to lend money raised in the market and to set interest rates) to households and to companies, which is allocated to higher return investments.
Replacing targeted credit (government-defined loans primarily for housing, rural and infrastructure sectors) with free credit, according to the ministry, also contributes to the effective reduction of equilibrium interest, plus social participation in the system is in line with the liberal government policy.
“Lower interest rates are expected to start to impact on activity in the first half of 2020, especially from the second quarter. The approval of the New Social Security and other fiscal adjustment measures contributed to the substantial reduction of the country risk, leading to the reduction of the equilibrium real interest rates, made possible by anchored and falling inflation expectations”.
Given the data presented, for the government the recovery of productivity may not be immediate, but is guaranteed. “Structural measures of fiscal adjustment, credit targeting, cost elimination and wedges to the private sector and the labor market will have permanent effects on the country’s productivity and income.”
The bulletin released today also forecasts the 2019 inflation forecast, calculated by the Broad National Consumer Price Index (IPCA), which rose from 3.26% to 4.14%. “The main reason for the strong change was the ‘home-food’ subgroup, mainly impacted by pressure on meat prices. The rise in the price of Brazilian meat is due to the sharp increase in Chinese demand, which seeks to compensate for losses in domestic production resulting from swine flu”.
Last week, the Brazilian Institute of Geography and Statistics (IBGE) confirmed the rise in inflation, which closed the year of 2019 at 4.31%.
Source: Agência Brasil
Brasil: Governo aumenta projeção de crescimento do PIB para 2,40% em 2020
PIB de 2019 foi revisado de 0,90% para 1,12%