Brazil’s economy is forecasted to have slowed in the final quarter of last year, with growth at 0.5% compared to 0.9% in the third quarter. Analysts attribute this deceleration to reduced private consumption and investment decline. Government spending is expected to support growth, yet fiscal concerns remain. The forecast for 2024 growth is 3.4%, while 2025’s forecast has been revised down to 2.3%.
According to a recent Reuters poll, Brazil’s economic growth is anticipated to have slowed in the final quarter of the previous year due to reduced private consumption and investment. The economy is projected to have expanded by 0.5% from October to December, marking a decline from the 0.9% growth observed in the third quarter, with an annual growth rate estimated at 4.1%.
Analysts from J.P. Morgan attributed this deceleration to diminished private consumption and a notable decrease in investment, which had not occurred for over a year. Despite this downturn, government consumption and a slight positive impact from net exports and inventories are expected to contribute positively to the growth rate.
Brazil’s reliance on federal spending has raised concerns regarding fiscal stability, leading to a market selloff. Additionally, foreign direct investment has not kept pace with the current account deficit, further constraining economic expansion.
On the supply side, projections indicate a quarterly increase of 0.4% in services, 0.1% in industry, and 1.8% in agriculture. Notably, the financial intermediation and insurance services sector is expected to perform strongly.
The forthcoming gross domestic product data is likely to confirm that Brazil’s economic growth outpaced initial expectations for 2024. Analysts have revised forecasts upward due to a robust job market and increased social spending, which have mitigated the adverse effects of elevated interest rates.
For 2024, the latest consensus estimate predicts annual growth of 3.4%, significantly higher than the 1.6% rate anticipated at the beginning of last year. However, the Brazilian government has revised its 2025 forecast down to 2.3%, as monetary tightening by the central bank continues and inflation projections are lifted. Despite these concerns, a senior government official affirmed that no extraordinary measures would be implemented to stimulate growth, maintaining commitment to Brazil’s fiscal framework.
In summary, Brazil’s economic growth forecast for the fourth quarter reveals a slowdown primarily due to reduced private consumption and investment. While government spending and net exports are expected to support growth, fiscal concerns loom due to reliance on federal support. Future economic forecasts indicate optimism, yet the government anticipates slower growth in subsequent years, reaffirming a steadfast approach to fiscal policy amid challenges presented by rising interest rates and inflation.
Original Source: www.marketscreener.com
