Focus Bulletin: in Copom week, market raises inflation forecast for 2023
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- December 6, 2022
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The forecast for 2023 rose from 5.02% to 5.08%
In the midst of discussions by the elected government about increased spending next year, the expectation for an increase in the IPCA – index of official inflation – from 2023 rose for the third straight week on Focus Bulletin🇧🇷 The projection for this year also remained high while the median for 2024 remained unchanged. The projection for 2022 increased from 5.91% to 5.92%, against 5.63% a month ago. The forecast for 2023 rose from 5.02% to 5.08%. For 2024, the median remained at 3.50%. Four weeks ago, estimates were 4.94% and 3.50%, in that order.
Considering only the 98 estimates updated in the last 5 business days, the median for 2022 increased from 5.93% to 5.94%. For 2023, it ranged from 5.00% to 5.11%, with the 97 changes made in the last week.
The medians in Focus for official inflation in 2022 and 2023 are above the target ceiling for these horizons (5.00% and 4.75%, in that order), pointing to three years of non-compliance with the Central Bank’s main mandate. For 2024, the market projection is above the central target of 3.00%, but below the upper limit of 4.50%.
At the moment, the focus of monetary policy is on the years 2023 and 2024. But the Central Bank has emphasized the horizon of six quarters ahead, currently the second quarter of 2024.
In Focus released this Monday, the 5th, the forecast for 2025 remained at 3.00%. The target for the year is 3.00%, with a range of 1.5% to 4.5%.
At the October Copom, the BC updated its projections for inflation with estimates of 5.8% in 2022, 4.8% in 2023 and 2.9% for 2024. The collegiate maintained the Selic at 13.75% per year for second time in a row.
Financial market economists changed the projection for the November IPCA in the Focus Bulletin. The median advance was from 0.51% to 0.53%. A month ago, the expected percentage was 0.40%.
For the December IPCA, the estimate continued at 0.64%, against 0.66% a month earlier. For January 2023, the forecast for the indicator dropped from 0.56% to 0.55%. It was 0.54% four weeks ago.
The expectation for smoothed inflation for the next 12 months ranged from 5.27% to 5.28% – a month ago, it was 5.13%.
Focus bulletin GDP projection
After the release of the Gross Domestic Product (GDP) for the third quarter (0.4%) and the revisions in the series released by the Brazilian Institute of Geography and Statistics (IBGE), the Focus Bulletin showed a strong increase in the scenario of economic growth in 2022.
The median for GDP growth this year jumped from 2.81% to 3.05%, against 2.76% a month ago. The estimate for GDP expansion in 2023 advanced from 0.70% to 0.75%, from 0.70% a month earlier.
Considering only the 65 responses in the last five working days, the estimate for GDP at the end of 2022 increased from 2.78% to 3.05%. In the case of 2023, the median variation was marginal, from 0.74% to 0.75%.
Focus also showed a slight increase in the projection for GDP growth in 2024, from 1.70% to 1.71%. For 2025, the median was maintained at 2.00%. Four weeks ago, rates were 1.80% and 2.00%, in that order.
The public accounts scenario contemplated in the Focus Market Report shows opposite situations in 2022 and 2023. If, on the one hand, the estimates for this year have improved, in line with the good fiscal results, on the other hand, the projections for 2023 deteriorate amidst fears over plans to increase spending by the elected government.
The estimate for the primary surplus in 2022 increased from 1.25% to 1.29% of the Gross Domestic Product (GDP). A month ago, the median was 1.00% of GDP. For 2023, the primary deficit projection worsened from 0.80% to 0.90% of GDP, from 0.50% four weeks earlier.
In relation to the nominal result, the deficit median increased from 5.76% to 5.51% of GDP this year. But the expected deficit for 2023 rose again from 8.25% to 8.52% of GDP. A month ago, the medians were negative at 6.10% and 7.50% of GDP, in that order.
The primary result reflects the balance between government revenue and expenditure, before interest payments on the public debt. The nominal result reflects the balance after interest expenses.
There was also stability in the projection for the indicator that measures the ratio between the public sector net debt and GDP for 2022, at 57.70%, against 58.45% a month ago. In relation to 2023, the estimate for net debt in relation to GDP increased from 61.00% to 61.50%, from 62.90% a month ago.
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