Brazil grew close to 1% in the first quarter, according to projections

RIO DE JANEIRO, BRAZIL – The Brazilian economy grew about 1% in the first quarter of this year compared to the last three months of 2021, driven by the good performance of the services sector.

Still, this expansion tends to slow down in the coming months, according to analysts’ projections released Wednesday, June 1.

The growth in the first three months of 2022 of the gross domestic product (GDP) of the largest Latin American economy, to be disclosed on Thursday by the Government, was 1.7% compared to the same period last year, according to the average market economists’ projections.

The projections of different financial operators for Brazilian growth between January and March vary from 0.5% forecast by Goldman Sachs to 1.7% calculated by Bradesco, the second-largest private bank in the country.

Even though the average of all the projections is close to 1% growth, among the most optimistic are important operators such as the consulting firm LCA, which expects an expansion of 1.6%; the investment bank BTG Pactual (1.5%), Safra bank (1.4%), and Itaú bank (1.3%).

The Getulio Vargas Foundation, Brazil’s main private center for economic and social studies, forecasts an expansion of 1.5%.

According to all analysts, the strong growth of the first quarter will be driven by the services sector, responsible for about 70% of the Brazilian GDP, which recovered strongly in the last months from all the impacts of the covid pandemic and is already at its best level in several years.

The services sector accumulated in the first quarter of this year a growth of 1.8% compared to the last three months of 2021 and 9.4% compared to the same period last year, according to data already released by the Government.

This strong expansion was caused by the end of all restrictions imposed to curb the pandemic, allowing all types of services to normalize their activities, including the hotel, transport, and food sectors.

The outcome of the services sector will positively impact an economy that had been recovering strongly since the last quarter of 2021 when Brazilian GDP grew by 0.5% compared to the third quarter and by 1.6% compared to the same period in 2020.

Such recovery allowed Brazil to end 2021 with a growth of 4.6%, its largest expansion in the last 11 years after the historic fall suffered in 2020 due to the pandemic when the economy retracted by 3.9%, its most significant setback in 24 years.

The services sector was mainly responsible for the recovery last year, with a growth of 4.7%, as industry advanced by 4.5%, and the agricultural sector suffered a 0.2% decline.

But economists also foresee that, once the services sector has stabilized, the economy will suffer a slowdown in the rest of the year caused by the international crisis, the high inflation (12.13% year-on-year), the jump in fuel prices, and the increase in interest rates to their highest levels in several years (the basic rate is at 12.75% per annum).

Some operators, therefore, foresee that the economy will register a small growth in the second quarter and that it may start to slow down as of the third quarter.

According to the latest projections of analysts consulted by the Central Bank, the Brazilian economy will end 2022 with growth close to 1%.

With information from EFE