Brazil’s economic activity records modest growth in 2nd quarter

The Brazilian economic growth rate moderated in the year’s second quarter.

According to a report released on Monday (14) from the Central Bank in Brasília, the Economic Activity Index (IBC-Br) registered an increase of 0.43% from April to June compared to the first three months of the year, considering seasonally adjusted data.

The economy had expanded by 2.41% in the first quarter, relative to the last three months of 2022. Year-on-year, comparing Q2 2023 to Q2 2022, there was an increase of 2.65%.

For June 2023, the IBC-Br index rose by 0.63%, reaching 146.65 points.

Compared to June 2022, there was a 2.10% growth. Over 12 months, the indicator reflects a positive 3.35% growth.

The IBC-Br offers insights into the country’s economic progression and assists the Central Bank in making decisions regarding the basic interest rate, Selic, which currently stands at 13.25% per annum.

This index integrates data from various economic sectors such as industry, trade, services, agriculture, and tax collections.

Selic plays a pivotal role in managing inflation.

High Selic rates can control excessive demand, impacting prices by making credit costlier and encouraging savings. Although higher rates can control inflation, they might hamper economic growth.

Due to a significant drop in inflation, the Central Bank’s Monetary Policy Committee (Copom) has begun to reduce the Selic this month, aiming to boost productive activity.

The Central Bank last lowered the Selic in August 2020 amidst economic contraction caused by the covid-19 pandemic.

Since then, there have been consecutive rate hikes, maintaining the rate at 13.75% annually for a period.

The methodology for calculating the IBC-Br differs from that of the Gross Domestic Product (GDP), Brazil’s official economic indicator.

The GDP value for Q2 2023 will be released on September 1st.

In June, a 1.9% growth was reported for Q1 2023, with a 4% growth compared to Q1 2022 and an overall 3.3% growth over the past year.

In 2022, Brazil’s GDP was 2.9%, amounting to R$ 9.9 trillion.