Brazil government increases GDP growth forecast to 1.6% in 2017

The signs of economic recovery led the government to increase the growth forecast for next year. Brazil's GDP growth estimates increased from 1.2% to 1.6% for 2017, announced Finance Ministry Secretary for Economic Policies Carlos Hamilton Araújo.

The official inflation forecast by the Broad National Consumer Price Index (IPCA) was kept at 4.8%. The numbers will be used to prepare the 2017 Annual Budget bill to be submitted to Congress until August 31.

According to the secretary, the government will only release the effect of the increased economic growth on federal revenues when the bill is sent. If revenues rise more than expected, the government will not have to increase taxes to raise next year's funds and meet the primary deficit target of $43 billion in 2017.

According to Araújo, the country should report economic growth again in this year's fourth quarter.

"In real terms, the industrial production has been increasing for four consecutive months. The Monthly Survey of Trade done by the Brazilian Institute of Geography and Statistics showed signs of steadying in trade, growing 0.1% in June. We have indications that the second half will report better performances than the first. In our baseline scenario, we expect GDP to grow in the fourth quarter compared with the third," reported the secretary.

For 2016, the Secretariat for Economic Policies reduced the GDP contraction forecast from 3.1% to 3%. The IPCA projection was kept at 7.2%.

The economic staff's estimates are more optimistic than the market's. According to Focus Market Readout, weekly updated based on estimates from financial institutions published by the Central Bank, the country should end 2016 with GDP dropping 3.2% and an inflation of 7.31%.

For 2017, market analysts predict a 1.1% growth  in GDP and 5.14%, in IPCA.

Translated by Amarílis Anchieta