Brazil's central bank revised its economic growth forecast for 2023 on Thursday, raising it to 2.9% from 2.0% projected June, and unveiled its first estimate for 2024 gross domestic product (GDP), indicating an increase of 1.8%.

These forecasts were outlined in the central bank's quarterly inflation report, which included its inaugural inflation projection for 2026, set at 3.1%, above the 3.0% official target.

The significant improvement in economic activity expected for this year was attributed to a "high positive surprise in the second quarter and, to a lesser extent, slightly more favorable forecasts for the performance of industry, services and household consumption in the second half of the year".

Brazil's economy is surprising on the upside due to a robust agricultural performance and government policies designed to boost household income.

Private economists surveyed weekly by the central bank are now anticipating 2.92% growth for this year and 1.5% for the next, while President Luiz Inacio Lula da Silva's administration estimates growth of 3.2% and 2.3%, respectively.

The central bank also revealed a narrower projection for this year's current account deficit at $36 billion, from $45 billion in the previous report, primarily driven by a stronger trade balance surplus of $68 billion, against the $54 billion estimate from June.

In terms of bank lending, the central bank now expects a smaller 7.3% rise in 2023, down from the previously reported 7.7%.

Policymakers again flagged further 50-basis-point interest rate cuts in upcoming policy meetings, while stressing they intend to keep tight borrowing costs in the battle against inflation.

The central bank kicked off an easing cycle in August after nearly a year of leaving rates unchanged. It repeated a 50-basis-point reduction last week that took the benchmark Selic rate to 12.75%. (Reporting by Marcela Ayres; Editing by Steven Grattan and Christina Fincher)