Government worsens forecast for GDP in 2021 and 2022, but maintains above 5% and 2%

Despite admitting lower economic growth in 2021 and 2022, the economic team’s projections for the performance of the Gross Domestic Product (GDP) in the two years are a level above the expectations of the financial market.

While for this year, the government expects the economy to advance 5.1%, against 5.3% projected in September, next year the forecast is for a 2.1% increase, against 2.5% estimated before.

The numbers were updated by the Macrofiscal Bulletin, released by the Economic Policy Secretariat of the folder in the Macrofiscal Bulletin, this Wednesday (17th).

“Among positive factors to boost growth in 2021, the good statistical loading of 2020, the high savings rate, the rapid recovery of investment, the robust credit market and the recovery of services – especially those provided to families, are listed. that are still below the pre-pandemic level”, highlights the document.

As a threat to this advance in economic activity this year, the SPE admits the water risk and the risk of an eventual resurgence of the pandemic.

For next year, the growth projections “are based on positive data from the labor market, which has been recovering from the fall in the pandemic, and on the high volume of investment contracted for next year, in part due to auctions and concessions”.

The document also highlights the expectation of resumption of informal employment and that the level of occupation and participation rate return to historical levels.

Short term

For the third quarter of 2021, the economic team’s projection is for a 4.8% increase in GDP. Last Tuesday (16), however, the Central Bank’s economic activity index (IBC-Br), considered by the market as a “preview of GDP”, signaled a 0.14% drop for the third quarter of the year.

The official data will be released by the Brazilian Institute of Geography and Statistics (IBGE) on December 2nd. If a drop is confirmed, the Brazilian economy enters again into a technical recession, characterized by two consecutive quarters of negative GDPs.