Brazil’s economy started the third quarter at a stronger-than-expected pace, leading to a revised forecast for stronger growth in 2023. The IBC-Br economic activity index, a key GDP predictor, reported seasonally adjusted growth of 0.44% in July compared to June, beating economists’ median forecast for a 0.3% expansion. On a non-seasonal basis, the index increased by 0.66% compared to July 2022 and recorded a growth of 3.12% in 12 months.
Brazil’s finance ministry revised its 2023 GDP projection to 3.2% from 2.5% due to better-than-expected activity in the second quarter, a promising crop outlook, positive results in selected economic indicators during the third quarter and expectations for economic growth . the recovery of China, one of Brazil’s key trading partners, in the fourth quarter. Private economists polled by the central bank also upgraded their projections, now predicting economic expansion of 2.89%, compared with less than 1% at the start of the year.
Brazil’s economy has benefited this year from the strength of its agribusiness and mining industries, supported by household demand following measures by President Luiz Inácio Lula da Silva’s government to increase family disposable income. However, despite the economic strength, government revenues have not grown as strongly, highlighting the challenges the government faces in balancing public finances until 2024. This task will require a significant increase in revenue collection.