Itaú updates projections for GDP, inflation and Selic (Image: Canva Pro)
Itaú updated its projections for the Brazilian economy and sees “increasing risks” in the country.
Starting with primary deficitthe chief economist, Mario Mesquita, says that the reduction in spending containment in the last bimonthly report suggests a limited fiscal adjustment, which contributes to the increase in the perception of domestic risk. “We assess that there has been a worsening in the transparency of the policy fiscal“.
For now, the bank maintained the primary deficit estimate of -0.4% of Gross Domestic Product (GDP) in 2024 and -0.8% of GDP in 2025.
Mesquita highlights that the increase in the risk premium affects the currency, but the performance has been offset by the increase in the exchange rate differential. feesfor now. “We maintained our exchange rate projections at R$5.40 per dollar at the end of 2024 and R$5.20 per dollar at the end of 2025”, he says.
For GDP, the bank raised its growth projection from 3% to 3.2% this year and maintained it at 2% in 2025. “We expect some slowdown in activity in the second half of the year, but less intense due to household consumption , supported by the resilience of the job market and the still positive credit cycle”, they state.
For the unemployment rate, projections remain at 6.9% in 2024 and 7% in 2025.
Inflation and Selic
For the inflationItaú also raised expectations for 2024 from 4.2% to 4.4% and for 2025 from 4.1% to 4.2%. “We incorporated the yellow tariff flag in December and more pressured food at home due to the recent rise in protein prices”, they state.
Regarding the Selicthe bank projects an upward cycle of 150 basis points. Thus, the rate should reach 11.75% at the end of 2024 and 12% at the beginning of next year.
The economist says that maintaining interest rates at a contractionary level throughout the first half of 2025 should result in a slowdown in economic activity, in addition to some appreciation of the exchange. This allows for interest cuts from the second half of the year, to 11% at the end of 2025.
“If the economy proves even more resilient, perhaps due to credit expansion, or if there is a significant increase in the risk premium with an impact on the exchange rate, the current upward cycle could be more extensive, which would threaten the cuts over the next year”, he warns.