Brazil economy ekes out 0.1% growth in Q3
SAO PAULO: Brazil eked out economic growth of 0.1 percent in the third quarter, the government said Tuesday, beating expectations of a contraction despite a hit from high interest rates and a slowdown in the agricultural sector.
SAO PAULO, Brazil: Shoppers buy TV sets at a supermarket during a Black Friday sale in Sao Paulo, Brazil. – AFP.
The result was better than analyst forecasts of a 0.2-percent contraction for Latin America’s biggest economy, a crumb of comfort for President Luiz Inacio Lula da Silva’s administration as it seeks to kick-start growth.
Brazil’s economy had grown 1.4 percent in the first quarter of the year and one percent in the second, according to revised figures from the national statistics institute, IBGE. The third-quarter slowdown was caused mainly by the key agricultural sector, which posted a contraction of 3.3 percent from the second quarter, IBGE reported. The industrial and service sectors both posted growth of 0.6 percent for the third quarter, it said—though that was a slower pace than the second quarter.
Despite the sluggish July-September quarter, analysts forecast gross domestic product growth of 2.84 percent for the year in 2023 and 1.5 percent in 2024 in a poll published Monday by the central bank.
Veteran leftist Lula, who returned to office for a third term in January, has vowed to deliver “solid” economic growth of more than three percent per year. But he has clashed with the central bank over what he calls its “absurdly” high benchmark interest rate, currently 12.25 percent, which he says is putting the brakes on the economy. The bank had aggressively raised the interest rate to fight soaring prices unleashed first by the COVID-19 pandemic and then Russia’s invasion of Ukraine.
But with the annual inflation rate now having fallen back to 4.82 percent—just above the central bank’s target ceiling of 4.75 percent—the bank has begun reducing the interest rate again, with half-point cuts at each of its past three meetings. Analysts expect another half-point cut when the bank’s monetary policy committee wraps up its last meeting of the year on December 13.—AFP
Still, high interest rates remain a brake on Brazil’s economy, analysts say. “We think the economy is entering a phase of softer growth—more akin to the growth rates recorded in the years before the pandemic of one to 1.5 percent,” William Jackson, chief emerging markets economist at consulting firm Capital Economics, said in a note.
Brazil’s economy has outperformed expectations this year under Lula—though it is far from the watershed boom he enjoyed during his first two terms as president (2003-2010). Finance Minister Fernando Haddad has so far managed to navigate the tricky strait between Lula’s big social spending plans and the business sector’s demands for fiscal discipline. However, Lula caused market jitters in October when he said his government was unlikely to hit its target of bringing the fiscal deficit to zero next year. – AFP.
