May 16, 2022 12:01 GMT
- Goldman Sachs have upgraded their forecast for real GDP growth in 2022 to a firmer 1.25%, from 0.6%; while downgrading that for 2023 to 0.9%, from 1.2%.
- The now almost fully completed dataset for Q1 points to a stronger than expected performance of the economy at the beginning of 2022 despite the significant tightening of financial conditions and further acceleration of inflation. Services activity was particularly robust during 1Q2022 (+1.8% qoq sa), particularly amidst the segments that had been most impacted by the pandemic.
- The Q1 resilience was due to a significant extent to renewed fiscal policy stimulus, stronger than expected labor market, and the short-lived and milder than expected impact of the Omicron wave earlier in the year on mobility and activity. In the pipeline there is likely at least a 5% increase in federal public sector wages, and potentially the postponement, or moderation, of scheduled urban transportation and electricity tariff hikes. Plus, GS would not rule out other measures to mitigate the impact of double digit inflation, and stimulate household consumption ahead of the October vote.
- All in, GS expect the economy to expand in H1 but to face intense headwinds in H2. This would leave a negative carry-over for 2023. Furthermore, the economy in 1H2023 is likely to endure the lagged impact from very restrictive monetary and financial conditions in 2022. Against this backdrop, GS are revising their forecast for real GDP growth in 2023 to 0.9%, from 1.2%, with risk skewed to the downside.