Brazil, growth above expectations

CESCE, Country Risk

Brazil's economy grew 0,8% between January and March compared to the previous quarter, after half a year of stagnation. The expansion was driven by household spending, favored by the improvement in the labor market, a moderation in inflation and government transfers.

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By sector, the quarterly growth of agriculture stood out, which increased by 11,3%, and services, with an increase of 1,4%, while industry remained stable. It should be noted that the eexpansion of agricultural production It is due to seasonal factors, since the first quarter concentrates the important soybean and corn harvests, which have a much greater economic weight than the traditional crops of the fourth quarter, such as wheat and oranges. However, in year-on-year terms, agriculture contracted 3%, penalized by the El Niño event.

The Minister of Finance, Fernando Haddad, celebrated the good data and noted that it aligns with the government's projections, which in May increased its growth projection for this year from 2,2% to 2,5%. However, these forecasts do not take into account the effects of the devastating floods in the state of Rio Grande do Sul, which represents about 6,5% of Brazilian GDP. Some economists warn that this rebound could be temporary, pointing to a slower-than-expected decline in interest rates, a weaker real and major flooding in southern Brazil in April and May among short-term challenges.

Source: CESCE