Agricultural GDP should grow 11.6% this year, says IPEA



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Overall, the estimated growth of the Brazilian economy is 1.4%.

The Institute for Applied Economic Research (Ipea) maintained its projection for gross domestic product (GDP) growth this year at 1.4%. For 2024, the forecast is for an increase of 2.0%. In the analysis of GDP components for 2023, there is an expectation of growth of 0.6% in the services sector and 0.4% in industry. The advance of 11.6% expected for agriculture accounts for a large part of the expected performance. The data is in the General Outlook of the Conjuncture, a detailed analysis of the Brazilian economy released this Friday (31) by Ipea's Directorate of Macroeconomic Studies and Policies.

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The projection of an increase of 1.4% of GDP is the same as that presented in December 2022 by the Ipea Situational Group and reflects a scenario in which the economy recovers progressively throughout the year. On the demand side, household consumption and gross fixed capital formation (GFCF) should end 2023 in a moderately positive way, with increases of 1.2% and 1.5%, respectively. Expectations for exports and imports in the 2023 GDP point to growth of 2.7% and 1.3%, in that order.

In the first quarter of this year, the growth prospects of important economies around the world improved, compared to what was expected at the end of 2022. However, the failure of regional banks in the United States, followed by difficulties in European banks, raised an alarm . The problem was avoided and did not prevent central banks in the United States and Europe from continuing to raise their basic interest rates.

There is a forecast of an increase of 1.2% in GDP in this first quarter of 2023, compared to seasonal adjustment. Compared to the same period last year, the increase should be 2.7%. In a scenario still characterized by the slowdown in economic activity, a large part of this result is explained by the excellent performance of agricultural GDP in the first three months of the year.

The composition of the 2.0% GDP growth projected for 2024 will be quite different from that considered for 2023, with a focus on more robust growth in industry (+2.2%) and services (+1.9%), and a more modest expansion of agriculture (+1.0%). In relation to demand, investments will be the highlight next year (forecast of +2.5%) and there will be stronger growth in household consumption (+2.0%).

For January this year, Ipea projects continued accommodation of economic activity. Since the last quarter of 2022, the behavior of sectoral indicators in Brazil indicates a widespread slowdown in economic activity, a situation that continued in the first months of 2023, characterized by increased levels of uncertainty.

The services sector is expected to suffer a decline in margin (-0.6%), although it will once again count on the positive contribution of the “services provided to families” segment in January, which is expected to grow 1%. For commerce, there is an expectation of an increase in sales in both the expanded and restricted concepts, with increases of 0.5% and 2% in the margin, respectively. Despite the worsening of families' financial conditions, researchers believe that the still positive trajectory of income and wages may have a beneficial effect on consumption, particularly on goods that are less dependent on credit.

The scenario considers that, this year, there will be an improvement in the anchoring of inflationary expectations with the introduction of the new fiscal framework and a resolution of the debate that was established on inflation targets. Ipea's projection for the Broad National Consumer Price Index (IPCA) is that it will end 2023 at 5.6%. Other factors that indicate a more positive scenario throughout the year are the prospect of the beginning of the easing of monetary policy, the investments previously scheduled for 2023 and some resilience in the job market, due to its dynamics with lags.

Source: datagro

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