Partly drugged with anabolic steroids, Brazil is still growing – 05/31/2023 – Vinicius Torres Freire

This Thursday (1st) we will find out how much the Brazilian economy grew in the already somewhat distant first quarter. Among the group that usually make predictions that are more or less wrong, it is said that the GDP would have grown by something around 1.4%, an unexpected pace at the end of last year and quite good, given the reality of the country in the last decade. , between ruin and mediocrity.

By the most recent and, of course, partial indicators available, it is likely that the economy will grow something around 0.4% in the second quarter. That is, considering a year ending in June, GDP would have grown by around 2.5% (the result for 2022 closed was also surprising, 2.9%).

This does not necessarily mean that the country’s normal growth rate has changed from the annual 1.4% in 2017-2019 to around 2.5% or thereabouts. But, so far, the economy has withstood uncertainty, increased risks and a basic interest rate of 13.75% a year.

Part of this fatter GDP may have been fueled by passing factors such as blood sugar. For example, government transfers increased, as in the case of the much larger Bolsa Família (by the end of the year, R$ 130 billion higher than in 2022), in addition to the readjustment of other benefits that vary with the minimum wage.

There is something else, still in the short term. As Fernando Honorato Barbosa, head of the Department of Research and Economic Studies at Bradesco, observes, disinflation, in particular food, must have increased the purchasing power of the lowest incomes, which all go towards consumption. It doesn’t stop there.

This Wednesday (30), the IBGE employment and income data for April were released. The average wage figures were still strong and, slightly, indicate a pause in the slowdown that had been going on since December (according to seasonally adjusted data and a comparison with the same month of the previous year). Even growing at a slower pace, the salary mass (the sum of all salaries) still increased at 9.6% per year, despite the number of employed persons being almost stagnant this year.

Other circumstantial factors help, such as the excellent performance of agriculture and still high commodity prices. Even bank credit, affected by defaults, high interest rates and greater debt, has a relatively soft landing.

Free credit for legal entities has fallen, quarterly, since November 2022 (in real terms; discounting inflation). In the case of individuals, after a limp at the turn of the year, credit is still in the black, growing by one tico, as indicated by the Central Bank data for April.

It is also possible that there has been some so-called more structural change in the Brazilian economy, although it should not be a big deal and is a subject for another day.

As for the GDP result to be released this Thursday, it is very interesting to know what has been done with the investment (in new production facilities, homes, machinery, equipment, software). Perhaps from there we will have a clue about what is happening in this economy that is still growing, in its mediocre fashion, with the Selic rate high and inflation slightly falling (but high, in the case of services). It may be that we know that the country is just burning fat and transitory anabolics (savings from richer families, large additional public spending, for example).

In the year 2024, without new fats, still under the effect of the terrible Selic of 13.75% and still without much improved expectations about the government debt and reforms, it will be more difficult to hold the GDP. But you can still tidy up a little bit around the house. It helps if they stop talking nonsense in Brasilia.

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