Brazil’s economy is anticipated to grow by 0.5% in the last quarter of the previous year, down from 0.9% in the prior quarter. Key factors influencing this slowdown include reduced private consumption and investment, strong government spending, and fiscal concerns, while growth forecasts for 2024 have been revised upward to 3.4%.
Brazil’s economy is projected to experience a slowdown in the last quarter of the previous year, primarily due to diminished growth in private consumption and investment, as indicated by a recent Reuters poll. The economy is expected to have expanded by 0.5% from October to December, a deceleration from the 0.9% growth rate recorded in the third quarter. The annual growth rate is estimated at 4.1%, according to a median estimate of 21 economists surveyed between February 26 and March 3.
Analysts from J.P. Morgan noted that this slowdown stems from reduced private consumption and the first decline in investment observed in over a year. Conversely, robust government consumption, a slight positive contribution from net exports, and inventory movements are anticipated to have supported a positive growth rate at the year’s end. However, reliance on federal spending has heightened fiscal concerns, resulting in market selloffs.
Moreover, foreign direct investment in Brazil rose at a pace slower than the current account deficit last year, further constraining the nation’s economic growth. According to LCA 4intelligence’s economist Bruno Imazumi, predictions indicate quarterly increases of 0.4% in services, 0.1% in industry, and a 1.8% rise in agriculture sectors, particularly driven by the financial intermediation and insurance subsector within services.
Overall, the forthcoming gross domestic product data is likely to affirm that Brazil’s economic growth concluded 2024 significantly exceeding earlier market forecasts. Throughout last year, analysts revised their growth expectations upward, propelled by a solid job market and increased social expenditures, mitigated against the backdrop of high interest rates.
In the latest Reuters poll conducted in January, annual growth was forecasted at 3.4% for 2024, which is more than twice the 1.6% projection from the beginning of the previous year. The Brazilian government adjusted its 2025 growth estimate down to 2.3% as the central bank’s monetary tightening continued, accompanied by increased inflation projections. Nonetheless, a senior government official recently asserted that the administration would refrain from implementing extraordinary measures to stimulate growth, while reaffirming adherence to Brazil’s fiscal framework.
In summary, the Brazilian economy is expected to witness a deceleration in growth rates, impacted largely by slower private consumption and investment. While strong government spending and sectorial increases may offer some support, heightened fiscal concerns and a slower increase in foreign investments present challenges. Future predictions reflect an overall increase in growth expectations, mainly due to labor market resilience and social spending enhancements despite a tightening monetary policy.
Original Source: money.usnews.com
