Economy

Brazilian Economy Surprises Analysts with Second Quarter Growth

The Brazilian Institute of Geography and Statistics (IBGE) discloses positive numbers concerning Brazil’s gross domestic product

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  • According to the IBGE, the country’s GDP grew 0.4% from the previous quarter, revealing a moderate growth trend;
  • Several factors contributed to the expansion of the economy during the second quarter, including an increase in household spending of 0.3%.

After the disappointing results of the year’s first three months, a quarter in which Brazil’s gross domestic product dropped 0.2% from the previous quarter, the country’s economy seems to be picking up, seemingly against all odds.

After an intense few months of political and monetary reforms—especially the current government’s big push for the Social Reform and the Central Bank’s reduction of interest rates—the numbers disclosed by the Brazilian Institute of Geography and Statistics (IBGE) on Thursday (29th) are a breath of fresh air for the economy. According to the IBGE, the country’s GDP grew 0.4% from the previous quarter, revealing a moderate growth trend.

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The Brazilian Index of Economic Activity (IBC-Br) had forecasted a reduction of the GDP a few weeks ago (August 12th), against the positive results presented today by the IBGE. Having anticipated a further contraction of the GDP, economist Andre Perfeito at the brokerage firm Necton in São Paulo explained to The Wall Street Journal that “This is a very positive surprise that will lead to a review of our projections.”

Economists at Itaú Bank, however, are a bit more hesitant in considering the results as overly positive. Whereas the construction segment revealed a steady growth at 1.9%, Itaú economists Luka Barbosa, Alexandre Gomes da Cunha, and Matheus Felipe Fuck also emphasized that the second quarter’s expansion of Brazil’s GDP is 0.5% below their forecasts for the quarter.

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Several factors contributed to the expansion of the economy during the second quarter: the growth in industrial output at 0.7%, a rise of 3.2% of fixed capital formation, and an increase in household spending of 0.3%.

These positive results arrive weeks before a further injection of funds to stimulate consumption with the release of the Fundo de Garantia do Tempo de Serviço (FGTS) in September. Then again, in a global context of economic slowdown, any growth projection needs to be taken with a pinch of salt.