XP lowers economy estimates and sees GDP at a standstill in 2022

XP reduced its estimates for Brazil’s economic growth in both 2021 and 2022, starting to see zero variation next year, against a backdrop of supply restrictions and rising inflation in the country.

In a report released this Friday (3), XP began to see an expansion of the Gross Domestic Product (GDP) this year of 4.5%, 0.5 percentage point below the previous estimate.

And for 2022, the outlook is now zero variation, against a rise of 0.8% predicted before.

“Our projections (for 2022) already incorporate the contractionary (lagged) effects of the tightening of monetary policy, the increase in uncertainties about the fiscal framework and the political environment, in addition to a more moderate pace of growth in the global economy,” explained XP .

According to the team of economists who signed the report, the GDP performance next year will not be even weaker because there are favorable prospects for agricultural production, gradual normalization in the supply of inputs and expansion of the employed population.

On the other hand, total investments should contract in 2022, reflecting the rise in interest rates – in view of high inflation, the BC has increased the Selic, which is at 7.75% per year and under the perspective of a new increase in 1.5 percentage point at next week’s meeting.

The outlook revision comes after IBGE announced the day before that third-quarter GDP contracted by 0.1% in the third quarter, pushing the economy into a technical recession.

XP still estimates GDP growth of 0.3% in the fourth quarter of 2021 compared to the previous three months, due to the expansion of the level of employment, the recovery of the services sector and the slight improvement in industrial production.

“The bottlenecks in supply chains and the sharp rise in costs continue to hamper the industrial sector, which faces low levels of inventories and many uncertainties about the normalization of input supply,” the report said.

“In turn, persistently high and widespread inflation has limited the purchasing power of families and, in this way, explains a relevant part of the contraction in retail trade in the last quarter”, he added.

XP calculates that the IPCA will end 2021 at 10.2% and 2022 at 5.2%, with both rates above the ceiling of the tolerance range for the inflation target.