Brazil’s Economic Growth in Q2 2024

By Gabriel Burin

BUENOS AIRES (Reuters) – Brazil’s economy continued to grow solidly in the last quarter compared to the first three months of the year, buoyed by household expenditure, as predicted by a Reuters poll.

However, an increase in imports of goods and services is anticipated to have negatively impacted growth, as imports outpaced less-dynamic exports at the start of 2024 due to a strong foreign exchange rate that has recently depreciated.

Economic Forecast
Second-quarter gross domestic product (GDP) figures, set to be released on Tuesday, are expected to show a 0.9% expansion compared to the January-March period, during which the economy grew by 0.8%, according to the median forecast of 18 analysts polled between August 28 and September 2.

Barclays economists estimate the Brazilian economy grew 0.9% quarter-over-quarter and 2.7% year-over-year, supported by resilient private consumption, strong labor markets, and rising real wages. They noted that public spending has contributed to growth from increased social benefits and aid related to recent floods in April and May. However, the external sector is likely to be a drag on growth due to higher imports.

Santander analysts reported a 7.8% quarterly rise in imports, compared to a much lower 1.3% increase in exports. In the first quarter, imports and exports grew 6.5% and 0.2%, respectively, as Brazilians increased their purchases of foreign goods and services.

From a supply perspective, total industrial production, including mining, is expected to have expanded by 1.2%, though this growth is partially offset by a 2.4% contraction in the smaller farm sector, according to Santander.

Annual Economic Growth
The economic growth forecast from the survey anticipates a 2.7% increase for the second quarter, the highest rate since 3.5% in the same period of 2023, following President Luiz Inacio Lula da Silva’s inauguration at the start of last year.

J.P. Morgan economists noted that Brazil’s growth is surprising, as the economy may achieve close to 3% growth for the second consecutive year, outperforming other regional countries in 2023 and 2024. They expect this strength to continue into the third quarter but foresee a deceleration as both monetary and fiscal policies turn restrictive for growth.

Recently, Lula indicated he would accept a potential rate hike from his central bank chief nominee for 2025-2028. Concurrently, the finance ministry has committed to fulfilling its promise of fiscal restraint by year-end.

(Reporting and polling by Gabriel Burin; Editing by Ross Finley and Christina Fincher)