Brazil's economy grows by 2.9% in 2023

RIO DE JANEIRO (AFP) – The Brazilian economy will expand by 2.9% in 2023 after a fourth quarter of zero growth, the IBGE statistics agency reported this Friday.

First change: Last change:

3 min

According to the revised figures, the result of gross domestic product (GDP) of the largest Latin American economy is slightly less than 3% growth in 2022.

During the cumulative year, growth was mainly driven by the agriculture sector (15.1%), industry (1.6%) and services sector (2.4%).

However, after an initial boost provided by agricultural activity, the data showed a slowdown in the economy in the second half.

Official data for the fourth quarter (0.0%) showed stagnation in relation to the previous three months.

The market pointed to a positive result of 0.1% in the last quarter of 2023 and 3% for the year, according to forecasts from some 66 financial institutions and consulting firms collected by economic newspaper Valor.

The market expects GDP growth of 1.75% in 2024, according to the latest Focus survey by the Central Bank of Brazil published this week.

IBGE's Coordinator of National Accounts Rebecca Polis said the increase in agricultural production had a strong impact on the “record” result of the sector, outpacing the fall (-1.1%) in 2022.

“This behavior was largely driven by growth in soybeans and corn, Brazil's two most important crops, which had record productions,” he said in a statement.

Extractive industries also have a positive impact on GDP in 2023. Activity increased by 8.7% due to increased exploitation of oil and natural gas and iron ore.

See also  Millay doubles down on the position of an open economy and criticizes socialism

“The Most Promising Policy”

President Lula, who visited Guyana on Thursday, defended Brazil's good economic performance.

“The Brazilian economy is growing again, employment is growing again (…) we are reaping the benefits of a very promising policy,” he said.

The leftist president highlighted the opening of new markets for Brazilian agricultural products and improvements in workers' incomes.

“Our per capita income is increasing and 80% of workers are on contracts with a percentage above inflation,” Lula said.

The unemployment rate in the moving quarter from November to January was 7.6% in the previous quarter, but decreased compared to the same period of the previous year (8.4%).

This figure is the lowest since 2015 for the quarter ended in January.

The average salary of workers rose 3.8% in a year to 3,078 reais per month (616 dollars at the current exchange rate).

Effect of high rates

Many analysts attributed the modest growth in the second half to the effect of higher interest rates.

High rates limit economic expansion by making borrowing more expensive, discouraging consumption and investment, while reducing price pressures.

Since returning to power in January 2023, President Luiz Inacio Lula da Silva has pushed for lower rates to boost economic growth.

Brazil's central bank has implemented uninterrupted cuts in the benchmark rate since August last year at a steady pace of 0.5 percentage points.

The Selic rate stood at 11.75% in December. A fresh cut of 0.5 points to 11.25% was announced in January this year.

Market-predicted inflation for 2024 is 3.8%, according to the Focus survey, which is higher than the official target of 3% but within the target range (+/- 1.5 percentage points).

See also  The central bank predicts that the economy will resume potential growth rates in 2024

According to IBGE data, the indicator moderated last year and ended at 4.51% annually. It was 0.42% in January.

Read more

Local News