FILE PHOTO: A view of the GWM factory during the announcement of the beginning of the activities to produce electric and hybrid cars, in Iracemapolis, Brazil April 27, 2023. REUTERS/Carla Carniel/File Photo
BRASILIA (Reuters) – Brazil’s Finance Ministry lowered its forecast for the country’s economic growth for this year and 2024, a report by its economic policy secretariat showed on Tuesday.
The ministry now expects gross domestic product (GDP) growth in 2023 of 3.0%, slightly down from the 3.2% estimated in September. For 2024, the forecast was cut to 2.2% from 2.3% previously.
“The change reflects increased uncertainties in the external environment due to the outbreak of geopolitical conflicts,” the secretariat said in its report, also mentioning the slowdown in China’s growth and the prospect of U.S. interest rates remaining at higher levels for longer.
The figures remain more optimistic than the projection of private economists of a 2.85% growth this year and a mere 1.5% expansion in 2024, according to a weekly central bank survey.
Finance Minister Fernando Haddad has been drawing attention to the economy’s lackluster performance in the third quarter, influenced by high borrowing costs and lower commodity prices, which have affected corporate performance and, consequently, tax revenue.
Brazil’s central bank kicked off an interest rates easing cycle in August after maintaining its benchmark interest rate steady for almost a year to tame inflation.
So far, policymakers have already reduced rates by 150 basis points to 12.25% and have signaled further cuts of 50 basis points in each of their next two meetings.
The government also lowered the 2023 forecast for headline inflation to 4.66%, from 4.85% previously. For 2024, however, consumer prices are now expected to grow 3.55%, from a previous estimate of 3.40%.
The new forecasts will guide the government’s new revenue and expenditure estimates for this year, set to be published later this week.