Brazil c bank reiterates GDP as key input; higher growth seen as possible

BRASILIA (Reuters) – Brazil’s Finance Minister Fernando Haddad said on Monday that the government might need to revise its economic growth forecast for this year again after bumping it up last month, and voiced confidence that inflation expectations will improve.

The ministry in September had raised its gross domestic product (GDP) growth projection to 3.2%, up from the previously estimated 2.5%, as economic activity continues to surprise on the upside.

Speaking at an event hosted by lender Itau, Haddad also noted that there had been communication issues from both the central bank and the executive branch of government leading to unanchored inflation expectations.

The minister stressed that real rates of 6.5-7% for the remuneration of public debt, currently reflected in the yield curve, “are irrational”, but expressed confidence that expectations would improve.

That would happen once market participants recognize the “intertemporal consistency” of President Luiz Inacio Lula da Silva’s fiscal framework, he said, adding that there was room to contain primary spending and reduce tax expenditures.

He also emphasized the importance of calibrating spending dynamics and ensuring a revenue flow compatible with contracted expenditures.