GDP in the 3rd quarter should reflect stagnation in the Brazilian economy

More signs of stagnation should be evident in the Brazilian economy figures that will be released this Tuesday (5), when the Brazilian Institute of Geography and Statistics (IBGE) presents data referring to GDP for the third quarter. The possibility of a retraction in the indicator, compared to the second quarter, is not ruled out by financial institutions.

For eight consecutive quarters, Brazilian economic activity has been growing in relation to the previous quarter. According to IBGE, the last drop occurred in the second quarter of 2021, when the economy shrank 0.2% compared to the first quarter of that year.

The Fundação Getulio Vargas (FGV) GDP Monitor points to the stagnation of economic activity in the third quarter compared to the second.

“The stagnation reflects the fragility of sustaining the growth of the Brazilian economy. The slowdown in agriculture and the services sector explains the stagnation of the economy from a supply perspective. From a demand perspective, the slowdown in family consumption and the drop in gross fixed capital formation (GFCF) – productive investment – ​​stands out”, says the research coordinator, Juliana Trece.

Another indicator that shows the Brazilian economy’s loss of steam is the Central Bank’s Economic Activity Index (IBC-Br). In the third quarter, it had a drop of 0.64% compared to the second quarter.

Financial institutions predict GDP decline

Itaú projects a 0.2% decline in GDP compared to the previous quarter. A series of factors weigh in on this scenario: agriculture losing strength in the second half of the year, trade slowing down and the weak performance of private investment. Furthermore, the slowdown in services also does not contribute to a favorable scenario.

Expectations for trade performance in the third quarter are not favorable. The bank projects a 0.1% decline in the level of sectoral activity compared to the previous quarter. According to People’s Gazette found, two factors would weigh on this situation: default rates are still high and families have a lot of debt.

Another segment that could have a negative impact on GDP figures is transport services, which had registered a strong increase in the first quarter, benefiting from the exceptional performance of agribusiness.

Agriculture, the flagship of the economy in the first half of the year, is also expected to lose momentum. The negative contribution comes from the loss of importance of the soybean harvest in accounting for results in the second half of the year.

On the demand side, the negative highlight comes from investment. Gross fixed capital formation (GFCF), according to the bank, could record a drop of 4.9%, given the decline in production and imports of capital goods.

XP Investimentos has the same expectations as Itaú. The estimate is a drop of 0.2%, driven by the dissipation of the positive shock in agriculture and the cooling of domestic demand. Bradesco is more pessimistic, projecting a drop of 0.3% compared to the previous quarter.

Expectations for 2023 have dropped slightly in recent weeks

The more restrictive scenario, still marked by higher interest rates and a gradual accommodation of the labor market, had a discreet effect on growth expectations for 2023.

The midpoint of growth projections, according to the Focus bulletin released this Monday (4), signals an increase of 2.84% in this year’s GDP. at the best time, in mid-October, the median was 2.92%.