Brazil’s Economic Growth Projected to Slow in Fourth Quarter

Brazil’s economy is forecasted to slow down in Q4 due to diminished private consumption and investment. A projected 0.5% growth in the last quarter signifies a decline from the previous quarter. Despite fiscal challenges, future growth estimates have strengthened, forecasting 3.4% growth for 2024. The government remains committed to its fiscal policy without implementing exceptional measures to spur growth.

Brazil’s economy is expected to experience a slowdown in growth during the final quarter of the previous year. According to a Reuters poll conducted among economists from February 26 to March 3, the economy is anticipated to expand by 0.5% in the fourth quarter relative to the previous quarter, with an estimated annual growth rate of 4.1%. This projected increase marks a deceleration from the 0.9% growth observed in the third quarter.

Analysts at J.P. Morgan attribute this slowdown to reduced private consumption and a decline in investment, which is the first of its kind in over a year. Nevertheless, solid government spending, a positive contribution from net exports, and inventory levels are expected to support a positive growth rate at the end of the year. The economy’s dependency on federal spending raises fiscal concerns, resulting in market selloffs.

Despite these issues, there has been a noted increase in foreign direct investment, although it was insufficient to offset the current account deficit. Economists predict modest quarterly growth across different sectors, with 0.4% growth in services, 0.1% in industry, and a significant 1.8% in agriculture. Within the services sector, considerable strength is anticipated in financial intermediation and insurance.

As Brazil approaches the release of gross domestic product data, expectations are high that growth figures will surpass initial market forecasts. Analysts have been consistently adjusting their predictions upwards. The latest estimates suggest a robust annual growth of 3.4% for 2024, a significant increase from the 1.6% rate recorded at the beginning of last year.

For 2025, the Brazilian government has revised its growth forecast downwards to 2.3%, as the central bank continues its cycle of monetary tightening. The government, however, has indicated that it will not implement extraordinary measures to stimulate growth and remains committed to maintaining the fiscal framework.

In conclusion, Brazil’s economy is showing signs of slowing growth, primarily due to decreased private consumption and a decline in investment. However, government spending and positive contributions from net exports have mitigated the decline. While there are fiscal concerns, estimates for future growth remain optimistic, with a projected annual growth of 3.4% for 2024. The government’s cautious approach to boosting growth and its focus on fiscal commitments are notable.

Original Source: www.marketscreener.com