The advance was driven especially by the increase in home consumption due to labor improvements; “We are on the right path,” Lula celebrated.
Brazil’s economythe largest in Latin America, managed to surpass Italy and became the eighth globally by GDP, after growing 0.8% in the first quarter, a figure slightly above market expectations after two periods of stagnation.
“Further proof that we are on the right path,” Brazilian President Luiz Inacio Lula da Silva wrote on his X network account.
The president accompanied his tweet with a graph of the nine countries with the highest GDP. Last year Brazil finished as the ninth largest economy in the world. The graph that Lula uploaded, which takes the International Monetary Fund (IMF) as a source, is headed by the United States (29,081 billion dollars), followed by China (18,889 billion), Germany (4,642 billion), Japan (4,167 billion), the India (4,051 billion), United Kingdom (3,549 billion), France (3,156 billion), Brazil (2,362 billion) and Italy (2,346 billion).
He Brazilian Finance Minister Fernando Haddad, highlighted that GDP growth occurred “in accordance with the government’s forecasts,” which allows the projection of 2.5% to be maintained for the year as a whole. ”The economic growth of the first quarter has been quite aligned with the ministry’s projections,” the minister said this Tuesday from Rome, in a joint press conference with his Spanish counterpart, Carlos Body.
Brazilian GDP effectively expanded 2.5% in the first quarter compared to the same period last yearaccording to data published on Tuesday by the Brazilian Institute of Geography and Statistics (IBGE).
The data show that the economy grew again in the first quarter of the year, after two quarters of results close to zero (0.1 in the third of 2023 and -0.1 in the fourth).
At the sector level, the expansion was driven by agriculture, which grew 11.3% over the previous quarter, and by services, with an expansion of 1.4%. The industry registered a small negative variation of 0.1%, considered stability, said the IBGE.
But the driving force was the sustained growth of household spending due to the improvement of the labor market, lower interest rates and a moderation of inflation, in addition to the continuity of government aid programs for families, highlighted Rebeca Palis, analyst. of the IBGE.
Palis highlighted the boost in “retail trade and personal services, linked to the growth of family consumption,” among other factors. The unemployment rate in Brazil reached 7.5% in the rolling quarter from February to April, a decrease of one percentage point compared to the rate of 8.5% in the same period in 2023.
“Temporary rebound”
The GDP for the first quarter slightly exceeded market expectations, which placed the expansion at 0.7%, according to the average of more than 70 estimates from consulting firms and financial institutions surveyed by the newspaper Valor Economico.
This is good news for Lula, who often maintains that the Brazilian economy will experience greater growth than experts predict.
In May, the government raised its growth projection in 2024 to 2.5% from the 2.2% it expected in March, although it warned that its calculations did not consider the effects of devastating floods in the booming state of Rio Grande do Sul. , one of the largest economies in the country, weighing about 6.5% of the Brazilian GDP.
The rebound in growth in the first quarter is “temporary, coming from a weak streak in the second half of last year, and does not mark the beginning of a strong recovery,” said William Jackson, chief emerging markets economist at Capital Economics. However, he added, the pace of growth and especially household spending at the start of 2023 will generate “concerns in the Central Bank,” which seeks to combat inflation.
With the argument of a “slower” moderation of inflation, the Central Bank cut its reference interest rate by 0.25 percentage points in May instead of 0.5 as it had been doing recently, to bring it to 10.5% .
This decision was poorly received by Lula, who since coming to power in January last year has pushed for a quick cut in interest rates to boost economic growth. High rates make credit more expensive, and cool consumption and investment, thus moderating pressures on prices.
Brazil closed 2023 with GDP growth of 2.9%. At the beginning of May, ECLAC improved its growth forecast for the Brazilian economy for 2024, from the 1.6% it predicted in December, to 2.3%.
