GDP grows 2.9% in 2022, but retreats 0.2% in the 4th quarter – 02/03/2023 – Market

The Brazilian economy closed the year 2022 with accumulated growth of 2.9%, according to GDP (Gross Domestic Product) data released this Thursday (2) by the IBGE (Brazilian Institute of Geography and Statistics).

The result came in slightly below the median of market estimates. Analysts consulted by Bloomberg agency projected high of 3% for the indicator.

In the fourth quarter of 2022, GDP was negative after five consecutive advances. The decrease was 0.2% in relation to the immediately previous three months, which indicates a scenario of deceleration of economic activity.

The loss of pace was expected by analysts mainly due to the effect of high interest rates. The negative variation was in line with the projections of economists consulted by Bloomberg, of a low of 0.2%.

“The continuous increase in interest rates has a certain delay [atraso]. So, it was already expected that the economy, with these high interest rates, would go into a slowdown”, said Rebeca Palis, coordinator of National Accounts at the IBGE.

The 2.9% growth in 2022 came after a 5% increase in 2021. The economy had suffered a 3.3% drop in 2020, the initial period of the pandemic.

Last year was marked by the end of Covid-19 restrictions, which stimulated the movement of people and the consumption of services. There were also signs of a recovery in the labor market.

In addition, the government of then President Jair Bolsonaro (PL) adopted measures to stimulate economic activity on the eve of the elections. Expansion of Aid Brazil and tax cuts on fuel are part of the list.

On the other hand, the increase in interest rates to contain inflation created a brake on economic growth, especially in the second half, as credit became more expensive for families and companies.

In this scenario, analysts began to predict a slowdown in GDP from the final stretch of last year. The movement, they say, tends to continue in 2023, the first year of the Luiz Inácio Lula da Silva (PT) government.

“The Brazilian GDP grew 2.9% in 2022, below the strong advance of 5% registered in 2021. Despite the good performance in the year, the result of the 4th quarter (-0.2%) confirms our reading that the slowdown in activity is already underway,” said economist Claudia Moreno, from C6 Bank.

In the accumulated result for this year, the expected rise for the Brazilian economy is 0.84%, according to the median of the most recent edition of the Focus bulletin, released by BC (Central Bank) on Monday (27). The publication gathers estimates from financial institutions.

In February, the BC’s decision to maintain the basic interest rate (Selic) at 13.75% per year led to an offensive by Lula against the institution’s president, Roberto Campos Neto. The petista went so far as to say that the Selic level is a “shame”.

In 2022, GDP growth was driven by rises in services (4.2%) and industry (1.6%), which together represent around 90% of the indicator. On the other hand, agriculture fell by 1.7%, as a result of the soy crop failure.

“Of this 2.9% growth in 2022, services were responsible for 2.4 percentage points. In addition to being the sector with the greatest weight, it was the one that grew the most, which demonstrates how high its contribution to the economy was in the year “, said Rebeca Palis, coordinator of National Accounts at IBGE.

She highlighted the growth of transport services activities and other services. “It was a continuation [em 2022] of the resumption of demand for services after the Covid-19 pandemic. In other services, we can highlight sectors related to tourism, such as food services, accommodation services and car rental”, said Palis.

In addition to high interest rates, the slower pace of the global economy and persistent inflation are identified as issues that should inhibit activity in 2023. Agriculture, in turn, is heading towards a larger harvest than in 2022, which tends to generate relief in GDP.

“The positive effects of the economic reopening have already been exhausted, the world’s largest economies are also finding it difficult to grow and commodity prices are falling. In an environment of low global growth, it is difficult for the Brazilian economy to achieve a more robust performance” , said economist Claudia Moreno, from C6 Bank.

The bank predicts an increase of 1% for GDP in 2023. According to Moreno, this performance “may be a little better” with the expected record for the grain harvest and the government’s social benefits.

GDP CALCULATION

Products, services, rents, utilities, taxes and even smuggling. These are some of the components of the GDP, calculated by the IBGE, according to international standards. The objective is to measure the production of goods and services in the country in a given period.

The indicator shows who produces, who consumes and the income generated from this production. GDP growth (discounting inflation) is usually called economic growth.

The survey is presented from the point of view of supply (what is produced) and demand (how these products and services are consumed). Quarterly GDP is released approximately 60 days after the end of the period in question.