Brazilian Growth Revised Up To 1.7% For 2023 On Strong Data Thus Far In H123

• Fitch now forecasts that Brazil will see 1.7% real GDP growth in 2023, up from 1.2% previously, after a strong Q123 GDP print and solid economic data thus far in Q223.
• Real GDP growth came in at 4.0% y-o-y in Q123, well above Bloomberg consensus of 3.1%, and 1.9% q-o-q seasonally adjusted (consensus: 1.2%). This followed a series of solid high-frequency data releases, which saw Fitch revising up its real GDP growth forecast from 1.0% to 1.2% in early May.
• The growth in Q123 was largely driven by private consumption (which added 2.3 percentage points (pp) to overall growth) and net exports (0.7pp, in part due to a strong performance by the agricultural sector).
• Fitch’s forecast places them above Bloomberg consensus of 1.0% (which will likely rise post-Q123 print), though Fitch still expects the economy will slow sharply in the rest of the year as high interest rates weigh on private demand and investment.
• Fitch has also lowered its 2024 forecast from 2.2% to 2.0%, given the less favourable base of comparison (consensus: 1.6%).
• The risks to this forecast will materialize in the form of good economic data in H123 that leads the Banco Central do Brasil to keep a hawkish stance for longer, resulting in weaker growth than currently expected in late 2023 and 2024.

(Source: Fitch Solutions)