brazil

In Brazil, GDP grew by 2.8% in 2022. However, the deterioration of the outlook for the evolution of international markets, stricter fiscal policies and high interest rates generate forecasts of a slowdown of this indicator to 1.2% in 2023.

Fiscal policy was expansionist in 2022, driven by tax exemptions and social support under the "Brazil Aid" programme. However, by the end of 2022 it was signalled that policies would be reversed to cope with price increases and the need to reduce the budget deficit and public debt. There is a conviction on the part of public institutions that it is fundamental to consolidate public accounts, improve management of investment in infrastructure and increase incentives for the sustainability of the agricultural sector, thus promoting GDP growth in parallel with control of public finances. With regard to inflation, the Central Bank of Brazil continued to give priority to controlling prices, having revised the Selic rate upwards - from 9.25% at the start of the year to 13.75% at the end of the year.

The inflation forecast for 2023 and 2024 is for a drop from the 8.9% of 2022, with 4.2% in 2023 and 4.0% in 2024 - a forecast supported by the evolution in the price of oil and the significant reduction in consumption taxes, particularly with regard to energy products. This forecast presents some risks associated to the fact that the control of inflation is aligned with the control of the prices of regulated products (energy). In turn, the prices of industrial products and services, despite the forecast of slight increases, should remain dynamic, evolving in accordance with market conditions. Additionally, the low unemployment rate and the increase in real wages may have a negative impact on the evolution of inflation.