Brazil's Economy To Stay Weak Amid Doubts Over Lula's Spending Push  


  • Brazil's slowing economy will likely remain weak in 2023 as a planned spending drive by newly-elected President Luiz Inacio Lula da Silva risks keeping already-high borrowing costs elevated for longer.
  • Lula's government, which took power on Jan. 1, is increasing the size of welfare programmes well beyond strict budget limits to address deeply-rooted social problems. Former President Jair Bolsonaro's government did not keep within those rules either.
  • However, many investors and analysts fear a new wave of planned spending could put Brazil's debt on an even more unsustainable path and stir inflation, which is dropping after a long series of interest rate rises.
  • Heeding their worries, the central bank is set to keep benchmark rates high for a long time, but that may amplify an economic slowdown and stoke tensions with the government.
  • Growth is forecast to recede sharply to 0.8% in 2023 from 3.0% last year, according to median estimates of 44 economists polled between Jan. 9 and Jan. 20. The growth forecast for this year was unchanged from an October poll, with 2022 upgraded from 2.7% to 2.9%.

 (Source: Reuters)