Brazil's Finance Ministry on Thursday raised its projection for economic growth for the country this year, but also raised inflation estimates for 2024 and 2025, which highlights the price impacts of recent flooding in the state of Rio Grande do Sul.
The Gross Domestic Product (GDP) of Latin America's largest economy is now expected to grow 2.5% in 2024, up from 2.2% estimated in March, the ministry's economic policy secretariat said in a statement.
The Government cited solid growth in retail sales and services provided to familiesan increase in net job creation and an expansion in credit granting among the reasons behind the upward revision.
The economic growth estimate for 2025 remained at 2.8%.
The new GDP projections do not take into account the impacts of the fatal floods in recent weeks in the state of Rio Grande do Sul, in the extreme south of Brazil, which caused the death of 151 people and left more than 538,000 displaced.
“The magnitude of the catastrophe depends on the occurrence of new weather events, the effects of these impacts on nearby states, and the effect of fiscal aid and credit programs on rain-affected cities.s,” the ministry said.
However, the new inflation forecasts reflect the recent disaster.
The ministry raised its forecast for inflation this year to 3.70% from 3.50% previously, while 2025 consumer prices are now forecast to rise by 3.20%, compared to 3.10% projected in March.
The adjustment captures both the effects of the recent depreciation of the Brazilian real against the dollar and the hit of heavy rains in Rio Grande do Sul on the supply side and on the prices of products such as rice, meat and poultry.
“These prices should increase more sharply in the next two months, but a significant part of this increase should recede in the following months, with the normalization of supply“said the ministry.
The Government's estimates are more optimistic than those of private sector economists surveyed by the Central Bank of Brazil, who expect GDP growth to reach 2.09% this year and 2% in 2025, with inflation reaching 3.76% in 2024 and 3.66% next year.
