Brazil’s Finance Ministry cuts 2023 GDP forecast to 1.61%

BRASILIA, March 17 (Reuters) – Brazil’s Finance Ministry reduced its estimates for economic growth this year, mentioning the impact of higher basic interest rates on activity and credit, as well as reduced liquidity in the United States.

The Ministry’s Secretariat of Economic Policy (SPE) now projects a gross domestic product expansion of 1.61%, down from 2.1% in November. The projection for next year was also reduced to 2.34% from 2.5%.

In a statement, the secretariat said previous estimates, made under former President Jair Bolsonaro’s government, “minimized the contractionary effects of monetary policy on the economic cycle and credit market.”

New leftist President Luiz Inacio Lula da Silva has consistently criticized the level of the central bank’s benchmark interest rate, which has been held steady at a six-year high since September, arguing that it harms activity growth and threatens a credit crunch.

The secretariat also now sees higher inflation, at 5.31% in 2023 and 3.52% in 2024, up from 4.6% and 3%, respectively.

The official inflation target is 3.25% this year and 3% in 2024, with a margin of plus or minus 1.5 percentage point.

Reporting by Marcela Ayres
Editing by Chris Reese and Diane Craft

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