Brazilian Economy Shows Resilience

BRASILIA (Reuters) – The Brazilian economy closed the second quarter exhibiting resilience, bolstered by stronger-than-expected activity data in June, according to central bank figures released on Friday. This reinforces forecasts for a solid year for Latin America’s largest economy.

The IBC-Br index, a key GDP predictor, rose by a seasonally adjusted 1.4% in June compared to the previous month, surpassing the 0.5% growth anticipated by economists in a Reuters poll.

This monthly performance resulted in a 1.1% expansion in the second quarter compared to the prior three months. Brazil’s economy benefits from a robust labor market and a booming services sector, which hit an all-time high in June.

Following these activity results, Goldman Sachs economist Alberto Ramos has adjusted his GDP growth expectation for Brazil to 2.5% this year, up from the previously forecasted 2.3%. Santander also increased its projections.

Santander’s chief economist, Ana Paula Vescovi, expressed, “We are impressed by the current strength of Brazil’s economy,” in a note to clients. She revised her 2024 GDP growth estimate to 2.3%, up from 2.0%, expecting an even stronger short-term dynamic.

The second quarter’s performance demonstrated resilience despite severe floods in the southernmost state of Rio Grande do Sul in May, which devastated cities and displaced over half a million people. These events had led many economists to predict potential economic losses.

Finance Minister Fernando Haddad stated this week that the government is likely to revise the expected economic growth forecast for this year upwards to more than 2.5%, after maintaining it at that level in July.

Official GDP figures will be released by the statistics agency IBGE on September 3.