Brazil’s economy grew 3.4% in 2024, exceeding expectations; however, fourth quarter growth slowed to 0.2% amid monetary tightening. Predictions for 2025 suggest a deceleration in GDP growth, impacted by high inflation and rising interest rates, currently at 13.25%.
Brazil’s economy demonstrated a robust growth rate of 3.4% in 2024, marking the most significant expansion since the post-pandemic rebound. This growth, reported by the government statistics agency IBGE, exceeded market expectations supported by robust investment and household consumption. These developments can be attributed to governmental measures aimed at enhancing disposable income, alongside President Luiz Inacio Lula da Silva’s policies.
In comparison to previous years, the economic performance in 2024 represented an increase from the 3.2% growth observed in 2023 and was notably the best performance since the 4.8% growth recorded in 2021. However, signs of economic deceleration appeared in the fourth quarter, with a mere 0.2% growth from the third quarter, which was below the anticipated 0.5% according to a Reuters poll of economists.
Moreover, the annual growth rate of 3.6% in the fourth quarter also fell short of the expected 4.1%. Economists surveyed by the central bank predict that GDP growth may slow down to 2% in 2025, while the government’s forecast stands at 2.3%. This projection arises amid ongoing aggressive monetary tightening measures, especially as inflation concluded last year at 4.8%, surpassing the official target of 3%.
Since September, Brazil’s central bank has increased interest rates by 275 basis points, bringing them to 13.25%. Additionally, policymakers have indicated the possibility of a further 100 basis-point increase within the month. This strategy takes into account a strong labor market, expansionary fiscal policies, and significant credit growth, all of which are believed to sustain consumption and aggregate demand.
In summary, Brazil’s economy exhibited significant growth in 2024, propelled by favorable government policies and consumer spending. Despite promising annual growth figures, the economy exhibited signs of cooling in the fourth quarter, with projections for future growth indicating a potential slowdown due to stringent monetary policies aimed at curbing inflation. Moving forward, the central bank’s interest rate adjustments will be crucial in shaping economic dynamics in Brazil.
Original Source: www.marketscreener.com
