1. Dolar rises and Real has one of the worst performances among emerging market currencies

The Brazilian real had the third worst performance among emerging market currencies this week, thanks to changes in fiscal goals and investors more interested in the American economy. The Brazilian currency registered a 1.82% drop in value compared to the American dollar, which now costs R$ 5.26, the highest amount in over a year. The Mexican peso and the Indonesian rupee are the only currencies with a performance worse than the real.

Among the reasons why dollar prices have risen are a better economic activity, an inflation rate that is still not affecting the United States, the conflict in the Middle East and, partially, issues raised by the potential new fiscal goal. 

Bloomberg Línea: Real tem o pior desempenho entre as principais moedas em abril
O Globo: Real tem um dos piores desempenhos entre as moedas emergentes

2. Finance minister says IMF will have to reassess growth projection for Brazil

On Tuesday (16), Finance Minister Fernando Haddad said the administration’s expectation for the Brazilian GDP growth is higher than the International Monetary Fund’s (IMF) projection. The IMF expects the Brazilian economy to grow by 2.2% this year and 2.1% in 2025.

The Brazilian GDO projection is 0.5 percentage point higher than what the IMF announced in January. The expectation for 2025 increased 0.2 percentage points compared to current projections. 

O Globo: Haddad afirma que FMI terá que ‘rever para melhor’ projeção de crescimento do Brasil
Valor: FMI terá que rever para melhor projeção para Brasil, mas cenário global pode afetar PIB, diz Haddad

3. Federal government predicts zero déficit for 2025

Luiz Inácio Lula da Silva’s administration will set as zero the goal for public accounts in 2025, meaning revenue must be equal to expenses. This resolution is different than what is was predicted in the fiscal framework approved last year.

When it announced the framework, the administration predicted it would reach zero fiscal deficit in 2024 and generate 0.5% of the GDP surplus in 2025 and 1% in 2026. The goal will be altered due to the government assessing that federal revenue will not be enough to generate surpluses.

O Globo: Governo Lula vai prever déficit zero em 2025; promessa anterior era superávit de 0,5% do PIB

4. Interest rates future increase and the market believes Selic rate will reach 10.6% by the end of the year

The market of interest rates futures witnessed a busy week due to the complicated foreign market and a worse risk perception caused by a reassessment of fiscal goals for the following years. These factors led agents to expect a Selov rate above 10.5% by the end of the year.

According to market agents, the worsening of the foreign and domestic markets will lead the Central Bank to reduce the flexibility of its monetary policy as of June and decide on a smaller reduction than expected for the basic interest rate. A Bank’s projection for the Selic rate by the end of the year went from 9.5% to 9.75%. The expectation for the basic interest rate in 2025 went from 8.5% to 9%.

Valor: Juros futuros voltam a disparar e mercado vê Selic em 10,60% no fim do ano

5. IMF predicts increase of Brazilian public debt to 86.7% of the GDP in 2024

On Wednesday, the International Monetary Fund (IMF) improved its prediction for the Brazilian public debt, but worsened its expectations for primary deficit. The gross dept will increase from 84.7% of the GDP in 2023 to 86.7% in 2024. The IMF expects it to continue to increase in the next five years, but at a slower pace.

In the last edition of the IMF’s report, published in October, the fund expected the debt to end the year at 90.3%, over three percentage points above the current prediction. In the long run, the Fund estimates the public debt to reach 96% of the GDP by 2028. In the report published this week, this number dropped to 93.4%. In the following year, according to the Fund’s projection, the public debt will reach 93.9% of the GDP. The IMF expects Brazil to reach zero deficit in 2026, meaning public expenses will only be balanced in the next administration. 

CNN: FMI piora projeção fiscal do Brasil em 2024 e não acredita em superávit com Lula