Economy

Brazil's Central Bank raises GDP growth estimate to 4.6%; consumer confidence increases

"In this context, we expect something close to stability in the second quarter and growth throughout the second half of the year," the Central Bank said

Brazil GDP 2021
Photo: REUTERS/Pilar Olivares
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  • According to cenbank, measures to preserve jobs, hopes for progress in COVID-19 vaccinations and high commodity prices suggest a favorable outlook for the economy;
  • The 4.6% gross domestic product growth forecast for this year is closer to the market consensus of 5.0%;
  • Also, consumer confidence in Brazil rose in June to a seven-month high.

Brazil‘s Central Bank on Thursday raised its economic growth outlook for this year to 4.6% from 3.6%, closer to the broader market consensus, although it said uncertainty surrounding the pace of growth was considerable.

In its latest Quarterly Inflation Report, the Central Bank said stronger-than-expected data, measures to preserve jobs, hopes for progress in COVID-19 vaccinations, high commodity prices and the delayed effects of monetary stimulus all suggest a favorable outlook for the economy.

“In this context, we expect something close to stability in the second quarter and growth throughout the second half of the year,” the Central Bank said, noting a “significant reduction in risks to the economic recovery”.

READ ALSO: Foreign Direct Investment (FDI) to Brazil plunged by 62.1% in 2020

The Central Bank repeated its view that a continuation of the government’s reform agenda to deregulate the economy and get the public finances on a more stable footing was also essential to the recovery and sustainable growth.

But it said uncertainty was considerable, due to new coronavirus variants, difficulty in obtaining vaccine ingredients, high costs in some production chains, and the potential affects of drought in the south of the country on electricity generation.

READ ALSO: Brazil Central Bank minutes raise the possibility of interest rates to hike at the next meeting

The 4.6% gross domestic product growth forecast for this year is closer to the market consensus of 5.0% in the Central Bank’s latest weekly ‘FOCUS’ survey of around 100 economists.

Breaking down the components of these new projections, the Central Bank raised its services sector growth forecast to 3.8% from 2.8%, agriculture to 2.5% from 2.0%, and industry to 6.6% from 6.4% in its last Inflation Report in March. The services sector accounts for around 70% of all economic activity in Brazil.

Also, the Central Bank raised its outlook for household consumption growth this year to 4.0% from 3.5%, and for fixed business investment growth to 8.1% from 5.1%. It cut its outlook for government consumption growth to 0.4% from 1.2%.

READ ALSO: Brazil’s beefed up ‘Bolsa Familia’ welfare program to be less than BRL 300 reais a month – sources

Brazil’s consumer confidence rises to 7-month high in June

Consumer confidence in Brazil rose in June to a seven-month high, a survey indicated on Thursday, a third consecutive increase as households looked through the current wave of COVID-19 to brighter economic prospects in the coming months. The Getulio Vargas Foundation’s (FGV) consumer confidence index rose 4.7 points to 80.9 points in June, the highest since November.

“For the first time since July last year, intentions to buy durable goods has risen more sharply, which seems related to greater optimism regarding the labor market in the coming months,” said survey coordinator Viviane Seda Bittencourt.

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