Brazil’s govt will maintain GDP outlook for 2022 and 2023 -sources

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Consumers shop at a weekly street market in Rio de Janeiro

By Marcela Ayres

BRASILIA (Reuters) – Brazil’s Economy Ministry will hold its economic growth outlook at 1.5% in 2022 and 2.5% in 2023, two officials told Reuters on Wednesday, forecasting activity ahead of market projections due to labor market strength and growing private investments.

The ministry will update its forecasts for economic indicators on Thursday and inflation figures are expected to be lifted from the previous outlook, in March, when the IPCA consumer price index was seen at 6.55% this year.

Data will be used in the bi-monthly income and expenditure report calculations, scheduled for Friday.

Economists have been increasing their forecasts for this year’s GDP, bringing the numbers closer to those forecast by the government.

Analysts say demand in the country has been helped by greater fiscal stimulus, following an increase in a cash transfer program to poorer people. In addition, the job market has shown signs of strength and the Omicron coronavirus wave has not knocked social mobility as feared.

However, they say expectations for 2023 have deteriorated, with aggressive central bank monetary tightening to tame inflation set to affect activity from the second half of the year onwards.

The central bank has raised interest rates to 12.75% from a record-low 2% in March 2021, and has already signaled another likely hike in June.

Goldman Sachs and Credit Suisse now see Brazil’s GDP rising 1.25% and 1.4% this year, respectively, against previous 0.6% and 0.2% projections. For 2023, Goldman Sachs lowered its forecast to 0.9% from 1.2%, while Credit Suisse cut its outlook to 0.9% from 2.1%.

Bank of America projected on Tuesday that Brazil will grow 1.5% in 2022 from 0.5% earlier. However, expansion is now seen at 0.9% in 2023, from 1.8% previously.

(Reporting by Marcela Ayres; editing by Richard Pullin)