Focus Bulletin: IPCA for 2022 drops from 6.00% to five.88%, Selic stays at 13.75%

The projection for GDP growth in 2022 went from 2.65% to 2.67%, the 13th consecutive increase, against 2.10% a month ago.

After the Monetary Policy Committee (Copom) kept the Selic at 13.75% per year, theFocus Bulletin showed again improvement in inflation expectations for 2022 and 2023while pointing to maintenance for 2024, where the relevant monetary policy horizon is heading.

For 2022, the estimate for the increase in the IPCA – index of inflation oficial – was reduced for the 13th week in a row, from 6.00% to 5.88%, a reflection of government-sponsored exemptions to lower fuel and energy and also the decline in gasoline prices. The data was released this Monday, 26.

A month ago, the projection was 6.70%. In relation to 2023, the median dropped for the sixth consecutive week, from 5.01% to 5.00%, against 5.30% four weeks earlier.

Considering only the 88 estimates updated in the last 5 working days, the median for 2022 went from 5.93% to 5.77%. For 2023, it remained at 5.00%.

The median for the 2024 IPCA interrupted the sequence of weekly highs and was stable at 3.50%, against 3.41% a month ago. The forecast for 2025 remained at 3.00%, a stable percentage for 63 weeks.

Despite the considerable improvement in recent weeks, the medians released by Focus continue to point to three consecutive years of goal overflowafter failing to comply with the BC mandate in 2021, with the IPCA of 10.06%.

The target for 2022 is 3.50%, with a top tolerance of up to 500%, while for 2023 the target is 3.25%, with a band up to 475%. For 2024 and 2025, the target is 3.00%, with a range of 15% to 4.5%.

In last week’s Copom, the BC updated its inflation forecasts with estimates of 5.8% in 2022, 4.6% in 2023 and 2.8% for 2024. The collegiate interrupted the monetary tightening cycle after 12 consecutive increases in the basic interest rate.

Selic remains at 13.75%

With the conclusion of the monetary tightening cycle last week, the financial market maintained its projection that the Selic rate will end the year at 13.75%, a level that was maintained by the Monetary Policy Committee (Copom) of the Central Bank in a decision divided within the collegiate. In the Focus Bulletin, the estimated percentage for 2022 it was already 13.75% a month earlier.

The median for the Selic at the end of 2023 remained at 11.25%, against 11.00% a month ago. Considering only the 70 responses in the last five business days, the expectation for the basic interest rate at the end of this year also remained at 13.75%. For the end of 2023, the 69 revisions made in the last five business days did not change the median of 11.25%.

By parking the Selic at the current level, the BC warned that it could resume tightening if inflation does not fall as expected in the period ahead. “The Committee will remain vigilant, assessing whether the strategy of maintaining the basic interest rate for a sufficiently long period will be able to ensure the convergence of inflation,” the statement added.

According to the Focus Bulletin, the forecast for the Selic at the end of 2024 remained at 8.00%, the same percentage as a month ago. The median for the end of 2025 went from 7.50% to 7.63%, compared to 7.50% four weeks earlier.

GDP growth goes from 2.65% to 2.67%

The financial market continued to improve estimates of growth in Gross Domestic Product (GDP) in 2022. The projection for the increase in GDP in 2022 went from 2.65% to 2.67%, the 13th consecutive increase, against 2.10% a month ago. The estimate for GDP expansion in 2023 remained at 0.50%, compared to 0.37% a month earlier.

Considering only the 49 responses in the last five working days, the estimate for GDP at the end of 2022 remained at 2.70%. In the case of 2023, there were also 49 updates in the last five business days, with a median variation from 0.50% to 0.58%.

The Focus Report also showed an increase in the projection for GDP growth in 2024, from 1.70% to 1.75%. For 2025, the median was maintained at 2.00%. Four weeks ago, rates were 1.80% and 2.00%, respectively.

Primary surplus

The Focus also showed in this second more favorable prognosis for the relationship between the primary result and the GDP this year, with the forecast surplus rising from 0.75% to 0.90%. A month ago, the percentage was 0.30% of GDP. The ratio between nominal deficit and GDP in 2022 went from 6.70% to 6.40%, against 6.80% a month ago.

The primary balance reflects the balance between government revenue and expenditure, before interest payments on the public debt. The nominal reflects the balance after interest expenses.

The report also brought a change in the projection for the indicator that measures the ratio between the net public sector debt and GDP for 2022. The median went from 58.70% to 58.40%, from 59.00% a month ago.

For 2023, the estimate for net debt in relation to GDP rose from 63.17% to 63.23%, from 63.50% a month ago. The median for the primary deficit remained at 0.50%. For the nominal hole, the estimate remained at 7.70%. The percentages were negative at 0.49% and 7.70%, respectively, four weeks ago.

Trade balance

Financial market economists reduced the surplus estimate gives trade balance in 2022 from US$65.00 billion to US$62.00 billion, compared to US$68.06 billion a month ago. For 2023, the projection ranged from US$ 60.00 billion to US$ 59.90 billion, compared to US$ 60.00 billion four weeks earlier.

In the case of the current account deficit projection of the balance of payments in 2022, the median increased from US$ 26.52 billion to US$ 27.03 billion, against US$ 18.50 billion a month ago.

In 2023, the projection for the current account gap ranged from US$ 32.00 billion to US$ 31.82 billion. A month ago, the expectation was a deficit of US$ 30.00 billion.

For analysts consulted weekly by the BC, the inflow of Direct Investment in the Country (IDP) will be enough to cover the hole in current transactions in these years. The median forecast for the PDI in 2022 rose from US$60.00 billion to US$61.00 billion, up from US$58.00 billion a month ago. For 2023, it ranged from US$66.00 billion to US$65.00 billion, from US$65.50 billion four weeks ago.

Exchange remains at BRL 5.20

The Market Focus Report showed maintenance in the scenario of american currency in 2022 and 2023 for the ninth straight week.

The estimate for the exchange rate this year remained at R$5.20, the same value as a month earlier. For 2023, it also remained at R$5.20, repeating the estimate from four weeks ago.

The annual exchange projection published in Focus is calculated based on the average for the rate in December, and no longer on the value projected for the last business day of each year, as it was until 2020. With this, the Central Bank expects to bring greater precision for the exchange rate projections of the financial market.

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