Following positive GDP readings in both Q1 and Q2, the Brazilian government is optimistic. In its most recent report, published on Monday, the Finance Ministry jacked up growth expectations, from 2.5 to 3.2 percent.
Growth projections improved across all sectors. Predictions for growth in the agricultural sector were revised from 13.2 to 14.0 percent. Industry output expectations were up from 0.8 to 1.5 percent, while services sector projections jumped from 1.7 to 2.5 percent.
“Extractive industries, in particular, should gain new momentum by the end of the year in response to the prospect of a warming Chinese economy in Q4 2023,” reads the Finance Ministry report. “The manufacturing segment, however, is expected to record a decline in the year, still affected by the contractionary effects of monetary policy.”
Brazil’s job market is improving, according to the government assessment, with growth in the employed population and a reduction in the unemployment rate. For Q3, the Finance Ministry expects the GDP to grow by 0.1 percent from Q2 and 2.2 percent annually.
The government is not alone in going more bullish about the Brazilian economy. Market agents surveyed weekly by the Central Bank also believe that gross domestic product growth will far exceed expectations from the beginning of the year. The median GDP growth forecast sat below the 1 percent mark until late in April. It is now at 2.89 percent.
“Market projections have gone in the direction of the predictions we have made here,” said Monetary Policy Secretary Guilherme Mello.
Additionally, Brazilians believe that the country’s economic conditions have improved, as we explained in the latest Brazil Weekly newsletter.
A new poll from Datafolha shows that positive perceptions about the economy have risen 12 points since March, to 35 percent. This is the highest level since the respected polling firm began asking Brazilians about their feelings about the economy in 2015.
As we regularly highlight, a president’s popularity depends on voters’ perception that the economy is moving in the right direction. While feelings about the economy affect government approval everywhere, this relationship is perhaps stronger in Brazil, a country with high poverty rates and tens of millions of people who depend on government policies to survive.