Brazil sees GDP accelerating in 2024 to 3.2% growth

BRASILIA (Reuters) -Brazil's Finance Ministry raised its economic growth forecast on Friday to 3.2% for this year, projecting an acceleration compared with 2023, reflecting the resilience of Latin America’s largest economy.

The ministry's economic policy secretariat calculation marks a sharp upward revision from the 2.5% estimate in July, incorporating both the positive surprise in second-quarter activity and expectations of stronger performance for the rest of the year, albeit at a slower pace.

In 2023, Brazil's GDP grew by 2.9%.

Speaking at a press conference, economic policy secretary Guilherme Mello said some key variables, including investment and industry, have performed better than expected.

The Finance Ministry also adjusted its inflation forecast for the year to 4.25%, up from the previous 3.9%, approaching the upper limit of the official target of 3%, with a tolerance range of 1.5 percentage points.

Mello argued that the adjustment for consumer prices is not tied to stronger activity or labor market pressures but rather to external factors, such as the severe droughts affecting much of the country.

"This obviously impacts energy prices in particular, as well as the prices of certain foods," he said.

"I don’t believe it’s possible to say that interest rates weren’t restrictive enough or that the upward inflation revision is related to elements from the real economy."

The new GDP projection, which will serve as input for the government's bi-monthly revenue and expenditure report due next week, is more optimistic than private economists' 2.68% expansion forecast in the central bank's weekly survey.

Earlier on Friday, a central bank index showed better-than-expected economic activity in July, continuing a series of robust indicators supported by a strong labor market.

The scenario has strengthened bets that the central bank will begin a tightening cycle next week, hiking interest rates by 25 basis points after holding them at 10.5% for two consecutive policy meetings.

For 2025, the ministry's economic policy secretariat slightly lowered its projected GDP growth to 2.5% from 2.6% and raised the expected inflation rate to 3.4%, up from the previous estimate of 3.3%.

(Reporting by Marcela Ayres; Editing by Leslie Adler and Alistair Bell)

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