GDP should show growth of 3% in 2022 and slowdown in the 4th quarter – 02/28/2023 – Market

The Brazilian economy ended 2022 with growth close to 3% in the year, but with a result that shows a strong slowdown in the fourth quarter of last year, according to projections by economists in the private sector.

The GDP (Gross Domestic Product) data will be released this Thursday (2) by the IBGE (Brazilian Institute of Geography and Statistics). Estimates collected by the Bloomberg agency show growth of 3% in the year. For the fourth quarter, expectations range from a drop of 0.9% to growth of 0.4%, with a median of -0.2%.

The most optimistic number for the last quarter of the year is from Bank of America. The lowest value, from the risk rating agency Austin Rating.

The Central Bank survey of economists also points to an expectation of growth of 3% last year. There is no projection for the quarterly result against the immediately previous quarter in the Focus bulletin.

The BC itself projected in its December Quarterly Inflation Report an expansion of 2.7% in the year, with a contraction in agriculture and growth in industry and services. For 2023, the monetary authority projected growth of 1% at the time.

According to the institution, the figures reflect the perspective that the slowdown in economic activity will consolidate in the fourth quarter, under the influence of the expected global slowdown and the impacts of domestic monetary policy. The basic interest rate was 2% per annum in March 2021 and reached the current 13.75% per annum in August 2022.

Mauricio Nakahodo, senior economist at Banco MUFG Brasil, projects growth of 3% for the year, with a drop of 0.5% in the fourth quarter.

Last year was marked by robust growth in the first half, with positive surprises in the labor market, reopening of activities and deflation due to the drop in fuel and energy prices, says the economist.

Nakahodo claims that the rise in interest rates affected the credit channel, mainly from the second half, also marked by the increase in household debt, a job market with many informal vacancies and inflation eroding consumer purchasing power.

For 2023, he expects growth of 0.8%, with half of this result due to the agricultural sector.

“All these factors that were already affecting growth in the fourth quarter of last year continue to weigh. We entered the year with high interest rates, we do not expect a strong generation of formal jobs, and domestic demand does not give breath to family consumption and investments. A third element is the risk of recession in the US and Europe”, says the economist.

The FGV Ibre (Brazilian Institute of Economics of the Getulio Vargas Foundation) projects a stable GDP in the fourth quarter, with a drop of 0.7% in agriculture and 0.2% in industry, and growth of 0.4% in services, in compared to the previous quarter. On the demand side, household consumption and investment should remain close to zero.

“We once again see a movement of growth in the service sector, but a deceleration and even a drop in the production and consumption of goods”, says the institution in its Macro Bulletin.

For the closed year of 2022, the institution projects growth of 3%, with a projection of expansion of just 0.2% in 2023. %.”

The calculation carried out by the GDP-FGV Monitor team points out that economic activity grew 2.9% in 2022, with a 0.2% retraction in the fourth quarter, numbers in line with the projections collected by Bloomberg.

Growth in 2022 was mainly influenced by the services sector, which contributed more than 80% to the good performance of the economy, according to Juliana Trece, research coordinator.

She also highlights the slowdown in growth throughout the year, due to high levels of interest and household debt, which should contribute to the slight drop in the fourth quarter of the year.