Brazilian Growth To Dip In 2022 As High Inflation And Interest Rates Limit Domestic Demand

• Fitch forecasts that the Brazilian economy will grow 0.7% in 2022, down from a 4.6% expansion in 2021, as higher inflation and rising interest rates limit private consumption and investment, and weaker sentiment restrains economic activity. 
• The 2021 outturn of 4.6% was in line with Fitch’s expectations, as robust consumption and private investment led Brazil out of the economic downturn in 2020 that was caused by the COVID-19 pandemic. However, higher inflation will cause private consumption to slow to 1.9% in 2022, from 3.6% in 2021 and will continue to undermine consumer confidence. 
• Inflation is expected to average 8.2% in 2022, compared to 8.3% in 2021 driven by higher food and fuel costs that will limit how much consumers can spend on other goods. Nevertheless, while inflation is expected to slow in H2 2022, it will likely happen gradually. 
• Fitch is slightly more constructive in the medium-to-long term as inflation and interest rates begin to moderate and policy uncertainty will partially abate following the October 2022 general election. As such, growth is forecasted to average 2.1% from 2023 to 2026.

 (Source: Fitch Solutions)