Brazil Strongly Surging Out of Recession, According to Q3 Business Activity Data

RIO DE JANEIRO, BRAZIL – Brazil is emerging from a recession caused by the coronavirus, Economy Minister Paulo Guedes said hours after the publication of a closely-watched indicator showing business activity surged in the third quarter.

The Brazilian economy is benefiting from a new policy mix of low interest rates and a weaker currency, boosting domestic demand and exports, Guedes said during a webcast. Earlier, the Central Bank reported that its economic activity index, considered a proxy for gross domestic product, rose 9.47% in the July-September period compared to the previous three months.

Latin America’s largest economy is faring better than its neighbors amid unprecedented monetary stimulus and billions of dollars in emergency spending. A closer look shows retail sales outperforming as government stipends for informal workers support purchases of basic goods, while the services sector is still lagging. Going forward, consumer demand may wane amid faster inflation and a reduction in aid.

Brazil doesn’t want an overvalued currency, Guedes said, adding that the Real will strengthen once the country attracts more investments. He added that Brazil is open to deepening trade relations with the U.S.

The national statistics agency will publish official third-quarter GDP figures on Dec. 3. The economy contracted by 9.7% in the second quarter compared to the first three months of the year and 11.4% from a year prior.