Banks Bradesco and BNP Paribas yesterday revised their forecasts for Brazil’s economic growth this year. Bradesco increased from 1.8% to 2.3% its estimate of high GDP (Gross Domestic Product) — sum of all goods and services produced by the country —. BNP raised its forecast from 1.5% to 2.5%.
The reports of the two institutions indicate that the change reflects positive surprises for domestic activity, the labor market and more fiscal stimulus. “The extraordinary withdrawal of the FGTS between May and June and the heated job market must have driven the increase in family consumption in the period”, says a Bradesco report. “
The measures recently approved by the National Congress, such as the increase in Aid Brazil and tax subsidiesshould sustain a still positive variation in the third quarter, postponing the deceleration we previously expected”, the document continues.
The BNP report mentions the rapid growth of the job market, with the generation of more than 1.3 million formal jobs in the year to June 2022and the unemployment rate, which is below the pandemic level.
“That being said, real wages remain lower than in 2020, which suggests that there is no pressure on the labor market. We expect to see further improvements before a reversal in 2023”, states the report signed by Laiz Carvalho (economist Brazil) and Gustavo Arruda (Research Director for Latin America).
In view of the better-than-expected performance of the economy and the recurring surprises with the job market, Bradesco forecasts a drop in the unemployment rate to 8% at the end of this year.
A BNP report also states that global prospects will continue to impact Brazil. It cites high inflation, high interest rates and low growth as the main features of the world economy for some time.
“While global growth and higher commodity prices have benefited Brazil’s economy this year, we believe these two factors will provide less help in the future,” says the BNP Paribas economists’ report.
As per the report, commodity prices are expected to remain high from pre-pandemic levels, but will likely have limited room to go much higher.