Brazil’s GDP should grow 1.4% in 2024 and 2.5% in 2025, World Bank project

The World Bank projected, in its forecast of global growth in 2023, that Brazil will have a slowdown in the growth of the Gross Domestic Product (GDP) at 1.2% this year, therefore, then, slightly up to 1.4% in 2024. Not the following year, 2025, with the expectation of a 2.5% increase.

The data foram divulged nessa terça-feira (6) in the last report Global Economic Outlook. According to the document, the result was due to nominal inflation in the core that fell from its peaks and, recently, below the upper limit of the Central Bank’s goal.

“It is expected that the tax rates decrease in the second half of the year, as inflation picks up further, allowing a recovery in 2024.”

Furthermore, the institution stressed that uncertainty about fiscal policy continues to harm business confidence and investment.

The explanation for the timid growth results in these and the next few years was attributed to agricultural exports.

“They should grow strongly because of the robust soybean crops and corn, therefore, external demand should not support their growth significantly in 2023.”

The vizinhos countries will also be impacted by this internal scenario of Brazil. The report suggests that production in Argentina should fall 2% in 2023 and grow 2.3% in 2024, as the economy recovers from the great dry season this year.

Meanwhile, the economic slowdown this year in Brazil, Argentina’s main trading partner, will weigh on the country’s exports of non-commodities. The resulting shortage of foreign exchange will create difficulties for importers, mainly non-agricultural industries.

Or Brazil may also have surprises with the external situation. Despite China’s growth recovery this year, its real estate sector remains weak, hampered by contrary structural winds.

“If it deteriorates further, it can significantly affect global metal prices. This negative risk is particularly relevant for Brazil, Chile and Peru.”

world cenario

The World Bank raised the forecast for global growth in 2023, as the United States and other major economies will prove more resilient than expected, but it says that higher tax rates will exert a greater weight than expected for the next year.

The real global GDP should rise 2.1% this year. This represents an increase in relation to the forecast of 1.7% disclosed in January, further below the 2022 growth rate of 3.1%.

The bank cut its forecast for global growth in 2024 to 2.4%, from 2.7% in January, citing the continuing effects of tighter monetary policy, mainly in the reduction of commercial and residential investments.

“The growth throughout the remainder of 2023 should slow down substantially, due to the pressure of the outdated and continuous effects of the monetary opening and the more restrictive credit conditions”, affirmed the World Bank.

The report shows that the growth of the USA for 2023 is now estimated at 1.1%, more than the double forecast of 0.5% in January, while the expansion of China should rise to 5.6%, in comparison with a forecast of 4.3% in January, up from 3% in 2022.

However, it reduced the target of its previous growth forecast for the US in 2024 to 0.8% and cut the forecast for China by 0.4 percentage point, to 4.6%.

bank stress

The recent stress of the banking sector is also contributing to more open financial conditions that will continue in 2024, says the creditor.

The World Bank cited a possible negative scenario in which banking stress results in a serious credit crisis and in a broader financial market stress in advanced economies.

It is likely to reduce the growth from 2024 quase the target, to just 1.3% – the slowest pace in 30 years except for the recessions of 2009 and 2020.

“In another scenario in which the financial stress spreads globally in a much greater degree, the world economy would enter a recession in 2024”, added the bank.

The bank says that inflation should fall gradually as growth slows and demand for labor in many declining economies, and commodity prices remain stable. More increasing than the core of inflation must remain above the targets of the two central banks in many countries throughout 2024.

*With information from Reuters.