Central Bank raises Brazil’s GDP forecast in 2021 to 4.6%

RIO DE JANEIRO, BRAZIL – The Central Bank (BC) revised its forecast for Brazilian gross domestic product (GDP) growth in 2021 to 4.6% from 3.6%, mainly reflecting the better-than-expected result in the first quarter of the year – despite the resurgence of the pandemic – and the indicators available for the current quarter. The information comes from the BC June Inflation Report (IR), released this Thursday.

The slight increase in the projection for industry in 2021, from 6.4% to 6.6%, reflects, in particular, the improvement in the forecast for construction, mainly due to better than expected results in the first quarter, explains the monetary authority.

The projection went from 2.8% to 3.8% for the services sector, with widespread highs in all segments except administration, health, and public education.

The agriculture and livestock sector estimate increased from 2% to 2.5%, reflecting, in particular, the strong growth in the first quarter, influenced by the record harvest of soybeans, the central bank stresses.

The projection for government consumption growth was lowered to 0.4% from 1.2%, mainly due to the negative surprise in the first quarter, which the bank said was related to the decline in public health services, such as surgical procedures, as a result of the increase in Covid-19 hospitalizations.

Regarding the domestic components of aggregate demand, the forecast for household consumption was raised from 3.5% to 4% and for gross fixed capital formation from 5.1% to 8.1%, reflecting the increase in statistical legacies following the first-quarter results.

Exports and imports of goods and services in 2021 are expected to increase by 6.8% and 10.7%, respectively, compared to the corresponding projections of 5.8% and 5.4% presented in the previous report, the Central Bank estimates.

The BC report projects the Broad Consumer Price Index (IPCA) at 3.3% in 2023. For 2021 and 2022, the estimates are 5.8% for 2021 and 3.5% for 2022, as released by the monetary authority in its most recent meeting to decide the basic interest rate.