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CNI Forecasts Indicate 3% Growth in GDP in 2023, but Increase in Investment is Crucial for Sustainable Development.
The National Confederation of Industry (CNI) announced that the forecast for the Brazilian economy is an expansion of 1.7% in 2024. For this year, the expectation is that the Gross Domestic Product (GDP) will grow by 3%, maintaining the same percentage as in 2022. Even with positive results, the economy in 2023 does not indicate a new cycle of development. The CNI analyzes that the current GDP was boosted by exceptional cyclical factors, such as the significant growth of the agricultural GDP, and a drop in productive investments.
Furthermore, the National Confederation of Industry emphasizes that the growth in 2023 does not guarantee consistent progress in the economy. A set of measures is needed to boost sustainable growth and strengthen productive investments in the long term.
Household Growth and Investment in 2024
Household consumption is expected to grow by 2.6% and investment will decline by 3.5% this year. The forecast is that the investment rate, which is the ratio between gross fixed capital formation and the GDP, will fall to 18.1%, down from 19.3% in 2022. This drop in investment will hinder better performance in the coming years. Therefore, Brazil needs a medium- and long-term strategy to sustain investment rates equal to or above 20% of GDP.
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The sustained growth of the economy is directly linked to increased investment. And the green economy agenda, sustainability, research and innovation, and digital transformation indicate the way for Brazil to attract industries and develop infrastructure to transition to a low-carbon economy. The country is very well-positioned to be a protagonist in this neoindustrialization, which can be achieved through the establishment of a well-structured industrial policy focused on overcoming the challenges of our society’, states CNI President Ricardo Alban.
The expectation for the next year is that the job market will not replicate the growth of 2023. The forecast is for an increase of 2.9% in the wage bill in 2024 compared to an increase of 6.4% this year. This is due to the fact that, for 2024, the CNI projects lower growth in the number of employed individuals. The effects of monetary policy, with high interest rates, will be negatively felt in employment by the end of this year.
The CNI also predicts that the international economic scenario will be unfavorable, which should prevent new historical increases in the positive balance of the trade balance. This year, the record surplus is due to the exported volumes of agricultural products, primarily soy and corn, and the extractive industry, especially oil and iron ore.
The forecasts are included in the document Conjunctural Report: Brazilian Economy 2023-2024 published this Thursday, December 14, at CNI headquarters. See:
Brazilian Economy 2023-2024.pdf(7.0 MB)
Growth Scenario for the Transformation and Construction Industry in 2024
The Director of Industrial Development and Economy of CNI, Rafael Lucchesi, explains that the transformation industry and the construction industry are expected to have modest growths of 0.3% and 0.7%, respectively, in 2024, and should compensate for the declines of this year. The transformation industry will end 2023 with a decline of 0.7%, and the construction industry will decline by 0.6%, following two years of strong growth.
According to him, the transformation industry will continue to face quite heterogeneous scenarios among sectors due to the difference between monetary policy, which inhibits economic activity, and fiscal policy, which stimulates it. ‘But this performance gap between sectors more sensitive to income and those more sensitive to credit should narrow with rate cuts,’ he explains.
‘However, unlike what happened this year, when household consumption and the external sector had a strong influence on GDP growth, in 2024, only consumption will play this role. Still, with less force,’ states Lucchesi. The expectation is that household consumption will grow by 1.8% in 2024.
Forecast of Lower Investment Rate in 2024
Investment is expected to perform modestly, but positively in 2024. The better performance of the construction industry, coupled with lower interest rates, should stimulate investment. CNI projects a 0.5% increase in gross fixed capital formation in 2024 compared to 2023. As the expansion of productive capacity will grow less than GDP, the investment rate will drop to 17.9%, down from 18.1% in 2023.
Growth of the Extractive Industry in 2023 and 2024
The GDP of the industry as a whole is expected to grow by 1.5% in 2023 compared to 2022. The extractive industry was boosted by increased external demand for oil and iron ore and is expected to grow by 7.1% in 2023. In 2024, the GDP of the extractive industry is expected to grow by 2%, mainly due to greater difficulties in exporting iron ore.
Expectations for the Agricultural Sector in 2024
The agricultural sector benefited from a significant reduction in production costs, coupled with a record harvest, as well as an external sector that presented opportunities and allowed the conquest of new markets. Thus, the expectation is that the agricultural GDP will end 2023 with a rise of 15.1%. However, this same scenario is not expected to be repeated next year. The forecast is for a reduction in the harvest of 2024 compared to that of 2023, with a growth of 0.2% in the sector’s GDP.
Inflation and Interest Rate Projections for 2024
The CNI expects the continuation of the declining inflation trajectory, with the IPCA at 3.9% by the end of 2024. The maintenance of this more favorable scenario will allow the continuation of the sequence of cuts in the Selic, so that the rate should end 2024 at 9.25% per year.
Press Conference on 2023 Data and 2024 Projections
Source: Industry Portal
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