2024-02-09 16:32:47
Even with the IPCA higher than expected in January – which made the DI open yesterday – Santander revised downwards its inflation projection for the year and still anticipates a more accelerated cycle of decline in the Selic, with the rate falling to 8.5% at the end of 2024 and 7.5% in 2025.
“In Brazil, the dynamics of disinflation are surprising and the interest cycle should be prolonged,” said Santander’s chief economist, Ana Paula Vescovi, in a report sent to clients today.
In December, Santander expected the Selic to end the year at 9.5%. But the more benign scenario for inflation and the beginning of the interest rate reduction cycle in the US and other major global economies will give room for the Central Bank to reduce the rate more quickly, which is expected to close the year at 8.5%.
“We project that there will be a reduction in the Selic rate at all Copom meetings in 2024,” states the bank.
For Santander analysts, the IPCA is expected to be 3.4% this year. In December, the forecast was 3.9%.
“We believe that lower prices for agricultural and industrial commodities will persist throughout the year and will be the main factor in the slowdown in tradable goods,” writes Santander.
The risks of rising inflation, says the bank, lie in factors such as the tight labor market, the real adjustment of the minimum wage and the imponderable nature of geopolitics. For 2025, the estimate remains at 4%.
With regard to GDP performance, the bank was at the most pessimistic end of the market, with a growth estimate of 1.2%, but has now raised the projection to 1.5% – practically in line with the market consensus, which it is at 1.6%, according to the latest Focus.
The greater resilience of GDP, states Santander, is due to factors such as the rise in household spending in an environment of high employment and the increase in government expenditure. “The payment of court orders at the beginning of the year and parafiscal measures will help to give some boost to domestic demand.”
The bank maintained its estimate that the primary deficit will remain at 0.9% in 2024. According to Santander, there was a short-term improvement in the collection trend, but the government’s goal of bringing the deficit to zero remains “challenging” and will be It is difficult to even meet the minimum target, which is a deficit of 0.5%.
“We are observing an improvement in the short-term trend in revenue, but the distance to achieving the result predicted in the Budget is around R$290 billion in net revenue, a fact that reinforces the risks and challenges from a fiscal point of view,” he states the bank team.
Depending on the results on the revenue side, the change in the fiscal target should be discussed in the Budget review in May.
Giuliano Guandalini
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