Brazil's Finance Ministry on Monday raised its projection for economic growth in 2023 to 3.2% from the previous estimate of 2.5% in July, primarily driven by unexpectedly strong activity during the second quarter of the year.

In addition to the second-quarter surprise, the ministry's economic policy secretariat said in a statement that a more robust crop contributed to the revision, along with positive results for some economic indicators during the third quarter, and expectations of an economic recovery of major trading partner China in the fourth quarter.

Finance Minister Fernando Haddad, who had previously stated that the economic expansion would exceed 3% this year, pointed out that the ongoing government agenda, including tax reform and its ecological transformation plan, holds the potential to bolster the country's growth.

"Some already say: maybe Brazil doesn't have as low a growth potential as previously thought. Why? They were betting that it would grow less than 1% this year, and it will grow over 3%," he said at an event focused on sustainable development hosted by industry groups CNI and Fiesp in New York.

The ministry maintained its forecast of a 2.3% increase in 2024 GDP. Inflation estimates have been held at 4.85% for this year, and adjusted to 3.4% for next year, up from 3.3% before.

Private economists have systematically improved their GDP calculations for Latin America's largest economy, but they are still less optimistic than the government, predicting an increase of 2.89% this year and 1.50% next year, according to a weekly central bank survey.

Haddad emphasized that the country should not settle for estimates of potential GDP growth of 2% to 2.5% annually, as commonly projected, if it is possible to enhance this figure through government initiatives.

A comprehensive consumption tax reform has already been approved by the lower house and awaits approval from the Senate.

The ecological transformation plan, also mentioned by the minister, has several aspects that have not yet been formally presented and depend on subsequent approval by lawmakers, such as the regulation of a carbon market.

Within this green plan, President Luiz Inacio Lula da Silva's government also aims to issue around $2 billion in its first sustainable sovereign bonds.

Last week, members of the economic team were presenting the issuance to investors abroad. According to Haddad, they had received an "extraordinary" reception to the road show.

Before speaking at the event, he mentioned to reporters that the issuance was planned for September or October.

The minister emphasized the significance of maintaining sound public finances and lowering interest rates to attract investments. He also highlighted that enhanced regulatory conditions can significantly bolster investments in Brazil.

(Reporting by Marcela Ayres; Editing by Steven Grattan and Bill Berkrot)