The Brazilian economy surprised and grew slightly in the third quarter

The Brazilian economy grew slightly by 0.1% in the third quarter of the year compared to the previous three months, still slowed by high interest rates and a slump in the agricultural sector, the Brazilian statistics agency (IBGE) said on Tuesday.

The first Latin American economy’s gross domestic product (GDP) result exceeded market expectations, which expected a contraction.

Compared to the same period of the previous year, the economy grew by 2%.

Despite slowing its quarterly expansion rate, the economy’s performance again surprised, giving good news to the government of Luiz Inacio Lula da Silva.

According to a Valor newspaper survey of more than 70 consulting firms and financial institutions, market forecasts call for a contraction of -0.2% in the third quarter.

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But Brazil’s GDP added its third straight quarter of expansion.

The result was driven by the services and industry sectors (both down 0.6%) and dampened by agricultural activity, which fell 3.3% for the quarter.

In the first three months of the year, expansion was 1.4% compared to the previous quarter, resulting in a downward revision from 1.8%.

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The second quarter, meanwhile, recorded 1% growth, a figure revised upwards from 0.9%.

Even with the benchmark interest rate at high levels (12.25%), the government expects GDP to be above 3% by the end of the year.

According to the Focus survey published by the Brazilian central bank last Monday, the market had its expectation at 2.84%.

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Through the third quarter, the economy is accumulating growth of 3.2% year-on-year compared to the same period in 2022.

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Since the beginning of his administration nearly a year ago, President Lula has emphasized the need to promote economic growth and job creation to alleviate South America’s massive poverty.

The leftist president promised that Brazil would grow in a “solid, reliable” and “distributive” way.

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The official unemployment rate was 7.6% in the quarter between August and October, the lowest level since February 2015.

But maintaining economic activity is a challenge due to the high level of the Selic ratio.

From March 2020, the Central Bank of Brazil (BCB) raised the Selic rate to 13.75%, maintaining it for one year to combat inflation.

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It began a downward spiral last August, cutting the rate three times to 12.25%.

The decline is both cautious and progressive in the face of more modest inflation figures.

Lula pressured the BCB with repeated complaints about “absurd” rates, which made loans more expensive for companies and consumers and slowed economic growth.

Consumer prices were 4.82% in the 12 months to October, and expectations for the year were 4.54%, according to the BCB Focus survey, just below the ceiling of the BCB target, set at 4.75%.

The market expects a fresh cut in Selic by 0.5 percentage points to 11.75% in the coming 12th and 13th, the last meeting of the year, as the “inflationary process” consolidates, according to PCB’s estimates. December.

However, at that level, experts point out, monetary policy is cooling economic activity.

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