The Brazilian economy is projected to grow by 1.8% this year, according to the Institute of Applied Economic Research (Ipea), an entity linked to the Ministry of Planning and Budget (MPO).
This positive GDP (Gross Domestic Product, the total value of goods and services produced in the country) forecast does not overlook the war initiated on February 28 by the United States and Israel against Iran, due to the uncertainties it has caused and the resulting increase in international oil prices.
While acknowledging that “the world is currently experiencing the greatest geopolitical tension since the end of the Cold War [1947-1991],” Ipea sees “reasons for moderate optimism,” as noted in the Economic Outlook Report No. 70 published this Thursday (9).
“The high uncertainty in the external scenario contrasts, however, with the relative rigidity of certain dynamics that have characterized the Brazilian economy for some years now – notably, the rapid and continuous growth of household disposable income and the volume of credit provided by the national financial system,” the study notes.
In Brazil, household consumption, influenced by the real increase in the minimum wage, is “one of the main drivers of the economy,” as described by the Brazilian Institute of Geography and Statistics (IBGE), responsible for calculating the GDP and also linked to the MPO.
The mentioned “available credit” can enable private investments, another factor contributing to GDP growth.
In addition to consumption and investments, the GDP growth account considers state expenditures and the balance between exports and imports.
According to Ipea, the state will continue the policy of the new fiscal framework “characterized by the combination of increased public spending of a social nature and the growth of public revenues, direct consequences, in the case of spending, of the policy of valuing the minimum wage and the reindexation of health expenditures to the Union’s net current revenue.”
Regarding foreign trade, Ipea points out that it will benefit from “expansionary fiscal policies” due to investments in artificial intelligence and spending on armaments caused by the conflict in the Middle East.
The institute recalls that “the outbreak of the war in Ukraine [in February 2022] did not prevent, for example, world trade from growing by 5.8%” that year.
Last year, Ipea accurately predicted a GDP growth of 2.3%. If the institute’s projection is confirmed this year, the total growth for the period 2023-2026 will be 10.7%, a rate higher than the two previous four-year periods.
In this case, the result would be five percentage points above the GDP of the previous four-year period (totaling 5.7% between 2019 and 2022), and 0.8 percentage points above the total GDP between 2015 and 2018 (9.9%).
Ipea’s estimate for the 2027 GDP is a growth of 2%.
Source: Agência Brasil.
Original published at O Cafezinho.