(Bloomberg) -- Brazil revised up its 2023 growth forecast following a better-than-expected economic performance in the first half of the year, while keeping inflation estimates unchanged.  

Latin America’s largest economy will expand 3.2% in 2023 and 2.3% in 2024, according to a report published by the finance ministry on Monday. In July, the government forecast gross domestic product to grow 2.5% this year. This is the third upward revision to the official estimate, which is now above the 2.89% growth expected by analysts surveyed by the central bank.

Brazil’s GDP rose 0.9% in the second quarter, three times as much as forecast by analysts polled by Bloomberg, buoyed by a strong services sector and a robust labor market. The finance ministry also based its improved forecast on an expected economic recovery in China, Brazil’s main trading partner, as well as data showing the local credit market growing again.

“The government is optimistic about the last quarter of the year due to positive developments we’re seeing in the labor and credit markets, as well as inflation,” Economic Policy Secretary Guilherme Mello told reporters in Brasilia. “Total wages and well as real income are growing while bad loans are falling with slower inflation.”

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The ministry kept at 4.85% its estimate for 2023 inflation and raised next year’s just marginally, to 3.4%. Both remain above each year’s target.

Brazil’s resilient economy has propelled President Luiz Inacio Lula da Silva’s approval ratings to about 60%, according to recent polls. It also has also supported the view that the central bank is managing to engineer an economic soft landing after an aggressive monetary tightening cycle led by its president Roberto Campos Neto. 

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