BTG reduces Brazilian GDP growth forecast from 0.9% to 0.7% in 2023

In a report released this Tuesday (27), BTG Pactual revised its forecast for the growth of the Brazilian economy in 2023. The bank changed its expectation of a growth in the Brazilian Gross Domestic Product (GDP) from 0.9% to 0. 7% next year.

In addition, the institution also revised the IPCA (Consumer Price Index) forecast for 2023 from 5% to 5.9%.

“We have increased our projections for 2023 and 2024 due to risks related to tax policy and the general deterioration of the fiscal scenario”, explains the document. For 2024, the predicted index went from 3.5% to 4%.

Also according to the bank, other factors caused the inflation forecast for the country to be revised, such as the increase in fuel prices, with the possible end of federal tax cuts, in addition to an expectation of greater depreciation of the real against the dollar (increasing the exchange projection for an average of BRL 5.30 at the end of 2023 against BRL 4.90 in the last report).

Finally, a larger-than-expected fiscal deficit for next year is also on the institution’s radar to corroborate the revisions.

The document considers that the fiscal policy proposals of the newly elected government bring significant risks to long-term prospects.

Since the last monthly report, the PEC of the Explosion has been approved by Congress, making room for BRL 170 billion in fiscal spending in 2023 above the spending ceiling. In the previous scenario projected by the bank, R$ 100 billion in expenses had been considered above the ceiling.

“The significantly more expansive fiscal policy will result in higher inflationary pressures in 2023 and beyond, making it difficult for inflation to converge towards the midpoint of the target in the coming years”, says BTG.