Reality Check

BRAZIL ECONOMICS - Report 24 Jun 2024 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

Domestic demand will continue to lead growth throughout the year, as it did in the first quarter, while GDP is near or above potential. Thus, we expect part of the additional demand to be met through increased imports (and/or reduced exports) and that GDP growth in 2024, also reflecting the negative impact of the situation in the South of the country, will be 1.6%. Inflation outlook is adverse, as suggested by our projection of 4.3% for 2024.

The positive output gap, unanchored expectations, and the depreciated exchange rate maintain pressure on prices. On the fiscal front, the government is likely to be unable to meet its primary surplus targets in the coming years (expected deficits equivalent to 0.8% of GDP in 2024 and 2025), in line with the rapid growth of expenses and difficulties in increasing revenues. External accounts indicate a decline in the trade surplus, which is expected to be $61.8 billion in 2024, reflecting the fast expansion of imports since the end of last year.

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