By Gabriel Burin
(Reuters) – Brazil’s economy is expected to have logged marginal growth last quarter against the previous three-month period, but it also probably advanced at a decent pace on a yearly basis that boosted overall 2023 activity, a Reuters poll found.
A faster expansion in the country’s industrial sector – led by extractive segments like mining and oil production – likely offset a further deceleration of agricultural output, while services kept growing moderately.
Gross domestic product (GDP) in Latin America’s No.1 economy is forecast to have increased just 0.1% quarterly and 2.2% annually, according to median estimates of 19 analysts surveyed Feb. 21-26.
Quarterly projections for official data due on Friday ranged between -0.1% and 0.3%. In the July-September period, Brazilian GDP expanded at a quarterly clip of 0.1%.
“We estimate the service sector maintained an annual growth rate of 1.8%, while industry should have registered an annual increase of 1.7% compared to 1.0% in the third-quarter,” Itau Unibanco analysts wrote in a report.
“The agricultural sector will have kept slowing down, with a 5.6% increase in the fourth quarter compared to 8.8% in the third quarter”. Farm output had risen more than 20% on the year in the first-half of 2023.
The economy performed better than expected for the most part of last year, bolstering the fortunes of President Luiz Inacio Lula da Silva’s government in the face of a close-fisted monetary easing approach by the central bank.
Industrial production rose for a fifth consecutive month in December, extending a positive streak in place since August that elevated activity at the manufacturing hub of Sao Paulo, among the largest in the world, back to pre-pandemic levels.
From the demand side, last year’s expansion reflected a still resilient domestic job market that combined with the positive impact on consumption of new welfare programs, as well as booming exports of commodities like soybeans and iron ore.
Private investment has been contracting, however, as companies postpone big capital spending plans to allocate funds in accounts paying high interest rates, amid rising uncertainty over Lula’s ability to plug wide fiscal deficits.
Calendar-year growth probably ended 2023 at a healthy rate between 2.8%-3.0%, and is set to decrease to 1.6% this year, said Alex Agostini, chief economist at Austin Rating, in line with a separate Reuters poll published last month.
“The government still faces the main challenge of upgrading economic expectations by balancing Brazil’s public accounts, given inflation must remain within target and interest rates under double-digits,” Agostini said.
(Reporting and polling by Gabriel Burin; Editing by Chizu Nomiyama)
